Q4 2023 Choice Hotels International Inc Earnings Call
Patrick Pacious: The excitement generated by the Radisson Americas Business Unit is further underlined by its RevPAR performance. For full year 2023, the Radisson Upscale brand Repar grew 9% year over year, outperforming the STR Upscale segment by approximately two percentage points, and achieving REBPAR index share gains versus competitors. At the same time, we've also been able to lower distribution costs for Legacy Choice and Radisson America's franchise owners by negotiating improved terms with a key third-party distribution partner. This has helped lower the overall franchisee's operating costs, which is critical in a time of high labor costs and interest.
Patrick Pacious: Additionally, thanks to our integration expertise and strategic investments in our state-of-the-art proprietary technology. We have achieved $85 million in annual recurring synergies, exceeding our original target by over 6%. We are now moving into the second phase of creating value from the acquisition by growing the Radisson Americas portfolio in the Americas region. Now that our unique and compelling franchisee success model is in place, we are starting to see momentum in franchisee interest across the combined portfolio. As we have discussed, the Radisson Americas acquisition has meaningfully enhanced our growth profile as it created a step function change in the size of our business, expanded our rewards program, extended our co-brand credit card opportunity, increased our geographic reach in the Americas region and opened new incremental earnings, This combination benefits all of our guests by giving them more options across the Choice Network and providing them with more incentives through our membership program. We now have 64 million Choice Privileges members who book directly with our franchisees, drive more revenue, and return more often than non-members, which translates to lower customer acquisition costs and higher margins for our franchises.
Patrick Pacious: Additionally, as Radisson America's hotels start to fully leverage Choice's hotel profitability tools, we anticipate enhanced profitability as these target solutions drive savings of up to 20% on the franchisee level. We believe we have proven our ability to unlock incremental value through the combination that neither would have accomplished on its own. We are confident in our ability to replicate this great achievement with the Wyndham combination.
Patrick Pacious: Given our expertise and capabilities in acquiring and integrating hotel brands, our demonstrated track record of improving the delivery of direct business to franchisees and our successful strategy of growing our portfolio with hotels that generate higher royalties per year. With regard to our proposal to acquire Wyndham, we remain committed to this compelling, pro-competitive combination. At its core, our proposed combination with Wyndham is driven by the natural fit of the two companies coming together to accelerate value creation for all stakeholders. It offers a compelling value for Wyndham shareholders today with an opportunity to meaningfully enhance the combined company's value as we realize synergies and drive additional growth. Importantly, we are confident that we can complete the transaction given our well-positioned, low-leverage balance sheet and continued progress on the regulatory front. For Choice shareholders, our proposal provides significant financial and strategic benefits. Wyndham shareholders would receive a substantial premium and immediate value for their shares without the execution risk associated with Wyndham's standalone strategy. Importantly, the proposal represents a multiple that Wyndham has never achieved absent COVID disruption.
Patrick Pacious: In contrast, Choice historically trades at an attractive level, representing compelling consideration for Wyndham shareholders. The value we consistently generate for our shareholders is due in part to our strong growth profile and prudent balance sheet management. The combination of Choices and Wyndham's asset-light businesses is expected to generate significant cash flow available to rapidly reduce leverage while still investing for growth. Both sets of shareholders would have the opportunity to participate in more than $2 billion of incremental value creation expected from the $150 million in annual run rate synergies that we believe a combined company would unlock. This value would be unlocked by bringing Choice's best-in-class franchisee success model to the Wyndham Network. Regarding next steps, we are continuing to progress on the regulatory process as expected.
Patrick Pacious: We are confident that we are well positioned for regulatory approval and can complete the transaction in a customary timeframe. Over the last six plus months, it has become clear that Wyndham's board is deeply entrenched and unwilling to take the actions that are in the best interest of their shareholders. In fact, their behavior is denying Wyndham shareholders the opportunity to realize significant value creation while receiving customary protection.
Patrick Pacious: As a result, we recently nominated a highly qualified slate of independent directors for election at Wyndham's 2024 annual meeting. If elected, these nominees are committed to their fiduciary duties and will act in the best interest of Wyndham's shareholders, which we believe is to move with urgency to maximize the value that can be created through a combined company. We're pleased that we've continued to receive positive feedback from both companies shareholders, who see significant upside potential in this transaction and want to see Wyndham's board engaged in negotiations. Importantly, since the beginning, we have continued to see support from our franchisees. Wyndham has mischaracterized franchisee sentiment and who actually represents the franchisee. Our franchisees are represented by their own franchisee associations and advisory councils, and they elect the leaders of these groups to represent them.
Patrick Pacious: They know our brands, they know our performance, and their feedback is vital to us. Our largest franchisee association, the Choice Hotels Owners Council, which represents over 3,000 Choice hotels and has been working with Choice for more than 50 years to maximize profitability for hotel owners, recently shared with its members, that there are multiple benefits for existing franchisees to Choice continuing to expand its brand portfolio. That choice has always been thoughtful in its approach to acquisition, and that they believe Choice will prioritize franchisee benefits in any future acquisition. And I'm pleased to say that we are in the process of aligning with our franchisee associations on our plan of action, which would ensure that franchisees' needs are continuously prioritized as part of the proposed combination. We believe a combined company would deliver clear benefits to both Choice and Wyndham franchises. These include lower hotel operating costs, less reliance on third-party distribution channels, and access to Choice's award-winning technology.
Scott Oaksmith: Regarding the Asian American Hotel Owners Association, AHOA, we continue to have good conversations with and have been working with the organization's leaders for many years on a variety of topics aligned with its mission, including industry-related policy and legislative matters. In closing, we're looking forward to all we could accomplish as a combined company. And at the same time, we remain focused and committed to executing on each of Choice's growth drivers that I have described. We are a forward-looking company that takes deliberate actions and is adapting to the evolving industry landscape. The results we achieved in 2023 demonstrate the effectiveness of our growth strategy and confirm that our proactive approach in this changing environment is working. I'll now turn the call over to our CFO, Scott. Thanks, Pat. And good morning, everyone.
Scott Oaksmith: Today, I will discuss our fourth quarter and full year 2023 results, update you on our balance sheet and capital allocation, and provide our outlook for 2024. Throughout my remarks today, I would like to note that all figures are inclusive of the Radisson Americas portfolio and exclude certain one-time items, including Radisson Americas integration costs, as well as transaction pursuit costs, which impacted our reported results. For full year 2023, a combination of higher than expected growth of the Choice legacy portfolio across our more revenue intense brands and markets. Strong, effective royalty rate growth. Successful integration of the Radisson Americas portfolio and the robust performance of our platform, procurement, and international businesses drove full year adjusted EBITDA of $540.5 million, which exceeded our full year guidance.
Scott Oaksmith: Our full-year adjusted EBITDA represents a new record, eclipsing the one set last year, increasing 13% compared to 2022 and growing 45% compared to the same period of 2019, which was our pre-pandemic peak. Even excluding the contribution from Radisson Americas, our full year 2023 adjusted EBITDA grew over 8% on a comparable basis year over year. Our full year 2023 adjusted EPS also exceeded our previously issued guidance, reaching $6.11 per share, a 16% increase year over year. For the fourth quarter of 2023, compared to the same period of 2022, our adjusted EBITDA grew 11% to $125 million. And our adjusted EPS increased 14% to $1.44 per share.
Scott Oaksmith: Let me turn to our key revenue levers, which include our unit growth, royalty rate, and REB PAR performance. In terms of unit growth, our strategic goal has been to accelerate quality room growth across more revenue-intense brands and markets, while simultaneously growing our effective royalty rate, which ultimately results in an outsized increase in loyalty. In addition to our mixed shift strategy for the broader portfolio, we are driving more revenue intensity at the individual hotel and brand level across, In fact, new hotels we added within a brand generated an average of nearly 20% higher royalty revenue than hotels exiting the brand. For full year 2023, we reported domestic unit growth of 1.4% year-over-year across our more revenue-intense upscale, extended stay, and mid-scale portfolio, which exceeded our guidance. Importantly, our domestic system size of the more revenue-intense brands for the Choice legacy portfolio grew by 1.8% for units and 2.4% for rooms year-over-year.
Scott Oaksmith: At the same time, our international portfolio increased by 2.6% for units and 2% for rooms year over year. We are particularly pleased with our outlook for international growth, as our international unit pipeline grew by 33% since the last quarter, more than doubling the number of hotels over the prior year. During 2023, we also leveraged our best-in-class conversion capability as we expanded our global rooms pipeline for conversion hotels by 16% since the last quarter and 34% over the prior year. I am pleased to report that our overall global rooms pipeline increased 6% quarter over quarter, reaching over 1,030 hotels, representing over 105,000 rooms at year-end.
Scott Oaksmith: This pipeline will serve as a strong platform for future growth. These results demonstrate that the deliberate decisions and strategic investments in our franchisee tools, brand portfolio, and platform capabilities are resulting in strong returns across our company. First, we strengthen our upscaled franchises. For full year 2023, we grew our domestic upscale rooms portfolio by 6.3% year over year and expanded its domestic unit pipeline by 5% quarter over quarter. Second, we accelerate our growth across the extended state brands portfolio. For full year 2023, we grew our domestic extended stay unit system size by approximately 16% year over year, highlighted by over 60 new hotel openings, a record-breaking year. At the same time, our newest brand, Ever Home Suites, is gaining meaningful traction across the development community, with 69 domestic projects in the pipeline, including 16 under construction.
Scott Oaksmith: We remain very optimistic about our extended stay franchise business and expect the number of our extended stay units to increase at an average annual growth rate of approximately 15% over the next five years. Third, we continue to invest in our mid-scale portfolio. Within this category, we grew our domestic upper mid-scale rooms pipeline by 9% quarter over quarter.
Scott Oaksmith: And for the fourth quarter, increase the number of domestic franchise agreements awarded by 6% year over year. Importantly, our first new comfort prototype opened in 2023, and our flagship brand continues to attract significant developer demand with over 130 projects in the domestic pipeline. And fourth, our economy transient hotels are continuing to benefit from their improved value proposition.
Scott Oaksmith: As a result, we expanded our domestic economy transient unit pipeline by 9% quarter over quarter, and the new hotels we added in 2023 generated higher royalty revenue than the hotels. Our effective royalty rate also continues to be a significant source of revenue. Our domestic system effective royalty rate for full year 2023 increased six basis points year over year, representing nearly $6 million of incremental royalties, including a five basis point increase to 5.1% for the Choice Legacy brand. The third revenue lever I will discuss is our Rep. Parper. Our full year 2023 domestic REB PAR increased 12.7% versus the same period of 2019 and 10 basis points year over year. Our fourth quarter domestic REB PAR increased 13.1% from the same quarter 2019, including a 15.2% growth from the Choice Legacy portfolio. RevPAR was down 3.9% year over year in the quarter, reflecting tougher year over year comps as we were the first hotel company to return to and significantly exceed pre-pandemic RevPAR levels.
Scott Oaksmith: Well, we expect to face tougher domestic comps at the start of this year. We expect RevPAR to increase as the year progresses. Given the favorable long-term business and leisure trends and the initiatives we put in place to capitalize on these tailwinds. We are pleased to report that our full-year 2023 International Portfolio-Wide REBPAR increased 11% year-over-year, with the Americas region excluding the U.S. growing 20% year-over-year.
Scott Oaksmith: At the same time, and as a result of our strong organic growth and the acquisition of Radisson Americas, we more than doubled the EBITDA contribution from our international portfolio in 2023. We continue to build on the strong momentum of our platform business. Specifically for full year 2023, we increased our platform and procurement services fees by 18% to $75.1 million year-over-year as we benefited from expanded offerings to our franchisees and, Additional Annual Convention Revenues from Higher Attendance, increase transaction volume with our qualified vendors, and the broader reach of our initiative.
Scott Oaksmith: We believe that we can drive this strong revenue growth in the years ahead as we continue to expand our platform and increase the number of products and services we offer to over 7,500 hotels, millions of guests, and other travel clients. I'd like now to turn to our well-positioned, low-leveraged balance sheet, marked by net debt to EBITDA of 2.9 times, which continues to be below the low end of our targeted range of 3 to 4 times. In 2023, we generated operating cash flows totaling nearly $300 million.
Scott Oaksmith: We also further enhanced our balance sheet in the fourth quarter, as we closed on a new $500 million term loan, which increased our liquidity to approximately $650 million as of year-end. We utilize our strong cash flows and under levered balance sheet to continue to invest in the business. Generating impressive growth in our profitability, as well as acquiring over $110 million of Wyndham Common Stock. In 2023, we were also able to return over $422 million to shareholders, including nearly $57 million in cash dividends and $366 million in share, We achieved all of this while remaining below our targeted leverage level. With our strong cash flow and ample debt capacity, we are committed to creating value for our shareholders by accretively investing to further expand our business and also effectively support the acquisition and successful integration of Wyndham. Our capital allocation priorities remain unchanged, and we are well-positioned to continue our long-track record of delivering outsized value for our shareholders.
Scott Oaksmith: Our priority continues to be investing in our business to drive organic growth. We will continue to make targeted investments in our business to drive growth focused on hotels that generate higher royalties per unit and further enhance the franchise owner's value proposition, while expanding our international and platform business. Secondly, we remain committed to value creating M&A, focusing on opportunities like Wyndham, where we can both improve the profitability of the existing franchisees as well as grow the combined portfolio. Historically, our strong cash flow and ample debt capacity have been more than sufficient to allocate capital to both organic and inorganic growth, allowing us to return capital to shareholders through our dividend and share repurchase program. Clearly, as demonstrated by our continued efforts and the confidence we have in our success. The Greatest Opportunity to Create Value for All Stakeholders, is to realize the over $2 billion of initial shareholder value creation present in a combination with Windows.
Scott Oaksmith: Should this not transpire, our current under-leveraged balance sheet and attractive growth trajectory, coupled with a significant discount to the intrinsic value of our stock, provide a very attractive return opportunity through the repurchase. Before opening it up for questions, I'd like to turn to our expectations for what lies, As we look into 2024, we expect to generate adjusted EBITDA in the range of $580 million and $600 million. We anticipate this growth to be driven by incremental contribution from Radisson America, including the expected additional cost synergies of approximately two million dollars, as well as organic growth across more revenue-intense hotels. Robust, Effective Ruralty Rate Growth, continued growth from our co-branded credit card, strong international business, and other. This outlook does not account for any additional M&A, repurchase of the company's stock, or other capital markets.
Scott Oaksmith: We expect our full year 2024 adjusted diluted earnings per share to range between $6.30 and $6.60 per share. Underlying our outlook are the following assumptions for full year 2020. We expect the domestic system year-over-year growth of the more revenue-intense portfolio brands to continue to accelerate and be approximately 2%. We project our domestic REB PAR to range between flat to 2% year-over-year. And finally, we anticipate our full year 2024 effective royalty rate to grow in the mid single digits year. Today's results are a testament that our strategy is working, and we intend to keep investing in those areas of our business that will generate the highest return on our cash. At this time, Pat and I would be happy to answer any questions you may have. Operator.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question? Please press star followed by the one on your touch tone phone.
Operator: You will hear a three tone prompt acknowledging your request and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the hands up before pressing any key.
Operator: One moment, please, for your first question. Your first question comes from Shaun Kelley with Bank of America. Please go ahead. Hi. Good morning, everyone.
Shaun C. Kelley: Thanks for taking my questions. If we could, Pat, Dom, and Scott, if we could start with just a little bit more around the Wyndham offer. I guess specifically at this point where it seems like the terms that have been set out remain largely stable up until we probably reach more details around the proxy contest. I'm just wondering, could you, for everybody's viewpoint, could you help us think a little bit more about any chance or opportunity to improve the economics of an offer from here, and how will feedback work during the proxy process? What I mean by that is, if you start receiving feedback at some point that the offer is just not sufficient to get the votes that you might want to achieve, can you adjust that offer during the proxy process, or maybe how do the mechanics work around that?
Patrick Pacious: Are you free to do that at any point in time? Thank you. Sure. Thanks, Shaun.
Patrick Pacious: I appreciate the question. You know, I think when you look at where we stand today, unfortunately, you know, Wyndham's board really just continues to refuse to engage. So to your first point about willingness to improve the offer, we've said this multiple times, the door remains open to Wyndham to engage in a constructive private dialogue with us. And we believe there's opportunity to improve our offer, if they'll engage with us. That's the first thing.
Patrick Pacious: And the second is, allow us to undertake some due diligence. So those have always been the key factors here, I think, that are in play. You know, regarding your question on feedback, I mean, the good news about what we did October 17th, and we brought our proposal public. And then on December 12th, when we launched the exchange offer, it's given us an opportunity to speak directly with Wyndham's shareholders. And we've gotten great feedback from them around what they like about the offer, and where they might, you know, like to see an additional improvement in the offer. And I think the feedback we've heard from them is around one word, they're frustrated. They're frustrated that Wyndham's board is not engaging in a conversation that would help answer those questions.
Patrick Pacious: You know, I think when you look at the proxy versus the exchange offer, let's not forget about the fact that during the exchange offer, that's been a blueprint for Wyndham shareholders to provide us with great feedback. They have the opportunity to tender their shares up until the exchange offer expires, which is currently 5 o'clock New York City time on Friday, March 8th.
Patrick Pacious: So there's opportunity for the shareholders to continue to express their interest with us around the transaction and also for us to hear feedback from them around how they view the offer that's on the table. Shaun, the only thing I'd just add is, if you think about the proxy process, what we've done is nominate a slate of directors, an independent slate of directors that we believe that would want to negotiate with us on the deal, so the deal could continue to change with a board that's willing to negotiate with us, so a voting for the slate of directors is really a vote for a board that's willing to engage in a dialogue to see if we can create value in this transaction. Great, thanks.
Patrick Pacious: And maybe just one on the business fundamentals, but obviously there was a lot in here about the acceleration you saw in net unit growth, and it seems like a decent amount of that hinges on some improvements in international. Just wondering if you could talk about the sort of contract economics in some of these international deals and partnerships and what you've been able to add to the pipeline there. Are these largely similar to your domestic franchise economics, or are these running through master partnerships and someplace where the economics may be a little bit different or a little bit inferior to what you see in the domestic business?
Patrick Pacious: Yeah, and it's a healthy mix, Shaun, as you know, we have, in some markets, we do direct franchising, we do that in markets where the regulatory environment is favorable for franchising, where small business people can aggregate capital and make investments. And so that's where those are markets where direct franchising works. And we've seen we've seen growth starting to pick up in those markets. And then we've also when you look at the economics of the master franchise agreements, those are usually a little bit different to your point. And if you look at what we did with the extension of our agreement with our partner in Scandinavia, Spain, in particular, those are more of a sort of master franchise, as opposed to direct franchising businesses. So the economics are a little bit different.
Patrick Pacious: But we're really excited about the growth we're seeing, particularly in those direct franchise markets in the Americas and in Australia. Yeah, I think Choi said that the ones we mentioned in our scripted remarks are growth in France and Spain are all direct markets. So more similar economics to what we have in the US than a master, Thank you both. Your next question comes from Michael Bellisario with Baird, please go ahead. Thanks, good morning everyone.
Michael Bellisario: You mentioned continued progress on the regulatory front. Can you be more specific there? I mean, what progress has been made? Have you finalized your initial submission yet to the FTC? And if you haven't, what's the estimated timing there?
Patrick Pacious: Yeah, thanks, Michael. You know, I think when you look at where we are today, the second request began about six weeks ago. So we are well into that process. You know, as we've stated before, that a second request is not uncommon.
Patrick Pacious: And we're continuing to work very constructively and cooperatively with the FTC on it. We're making a lot of progress on that front, we don't see any surprises. And as we've said before, we remain confident in our ability to complete this, this process as part of the transaction in that customary time, And then just one follow-up, maybe any examples that you could provide of things they've asked for or the types of questions and comments that they're looking for answers on? Yeah, I mean, they start with what's called, you know, sort of a broad request for information.
Patrick Pacious: And then as the process moves forward, they'll narrow it down into areas that they want to understand greater. But as we've said before, you know, I think part of what they're learning is very, in my view, supportive of a transaction. The first is that this is a very competitive marketplace, the lodging industry, you know, is a is a makeup of independent hotels, online travel agencies, a lot of large, well capitalized competitors.
Patrick Pacious: So they're looking at that. Second, they're looking at pricing. And as we said before, Wyndham and Choice do not set price, our franchisees do.
Patrick Pacious: And that is a very healthy factor with regard to regulatory issues. You know, they're looking into how, you know, the OTAs play in this industry. And as we've said before, one of the compelling reasons for putting our two companies together is to drive down the cost of running a hotel and ultimately reliance on expensive third party distributors.
Patrick Pacious: So they're learning about some of the specifics of the industry, how pricing works for the consumer, and ultimately, the really competitive nature of the spaces where we compete. And they also not just are looking at status quo, they're looking at a lot of what our competition is doing and how the competitive landscape is evolving. So a lot of the questions they're asking are around new brand launches from really well capitalized competitors in the segments where we currently compete today. So it's a it's a broad effort at the beginning. And as they move through that discovery process, we would expect, you know, those questions will narrow down. But you know, we're six weeks in, it's, it's probably, you know, at the sort of peak of the level of effort. And as we get closer to being substantially compliant with the second request, we would expect that the the FTC and Choice of When would be narrowing the list of issues to be dealt with. Got it. Thanks for that detail.
Patrick Pacious: And there's just one more for me, just on the fundamentals, the flat, the 2% REVPAR growth outlook, how are you thinking about the quarterly cadence in 24? And when might the year-over-year growth rate flip from negative to positive? Thanks. Thanks, Michael.
Patrick Pacious: In terms of REBPAR, you know, we still think the long term fundamentals for travel remain strong. So we look at a macro basis, supply growth is still expected to be relatively muted in the industry, growing less than 1%. But GDP, consumer spending, both expected to grow over 2% in 2024. And unemployment still remains at historical lows.
Patrick Pacious: So, you know, we're feeling confident Americans are still prioritizing their travel budgets with 80% of Americans planning to travel this year and most expecting to increase the amount they're spending on travel. So, you know, we think the business has quite a bit of room to grow. We're still below in terms of occupancy, our pre-pandemic levels.
Patrick Pacious: So, you know, where we believe is, you know, the first quarter will be again, against some tougher comps, but we should start to see positive REBPAR growth and kind of the middle of the second quarter, and then growing to that 0% to 2% we guided, Perfect, thank you. Your next question comes... Your next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen White Grambling: Hey, thanks. Maybe two follow ups on the FTC questions. How would you think about remedies if it does go down that path?
Patrick Pacious: And then what's the willingness or thought process on litigating if the FTC doesn't see things your way? Well, I think Stephen, it's important to just start off with, you know, our view of the regulatory environment, it's based in fact, and legal precedent. And so, you know, we look at what the conversations with the FTC might be, I don't want to speculate on where that might go. As we've said, publicly, you know, we are willing to make any changes that aren't materially having an impact on the transaction. But you know, what we've stated before, what we're seeing currently, you know, those are not things that we are focused on today. And then, as I said, I'm not going to speculate on where things might go.
Patrick Pacious: But we feel really confident, as I said, about how we view the regulatory environment. If you look at the presentation we put out on January the 10th, I think you'll see there that it's based, as I said, in legal fact and precedent around how the antitrust environment should be viewed in this combination, the facts for every case are different. And we feel really confident in our view of how things will progress on that. Great.
Scott Oaksmith: And maybe on fundamentals, can you just help us tie out the lower EPS growth versus EBITDA growth and perhaps even.., loop in your expectations for free cash flow conversion and the puts and takes there in 2024 and perhaps longer term. Yes, really the difference between the EBITDA growth and, I assume you're referring to Q4 versus the guidance. I'm referencing your 2024 outlook, so I just look at 10% roughly in the mid-point EDI growth, but low single-digit EPS growth. Yeah, really, the difference there is really interest expense and a slightly higher tax rate. So our debt is up about $300 million year over year, kind of on average, about half of that, a combination of higher rates that we incurred during 2023 and a slightly higher debt level as we get back to our targeted leverage levels. And then our tax rate is at 24.5%.
Scott Oaksmith: We had a few discrete items, some reversals of reserves in the fourth quarter that lowered our tax rate in 2023 that we don't expect to incur in 2024. And then from a free cash flow standpoint, I mean, are there any big puts and takes to think through whether it's key money that's going to be coming to fruition? Or I think there was also some affiliate investments, things like that.
Scott Oaksmith: In terms of the way we define free cash flow, we expect free cash flow to be similar to 2023. Our key money should be generally in the same range that we spent in 2023. So a slight increase in key money, but our free cash flow conversion should be consistent between 2023 and 2024. Great, thank you so much. Your next question comes from Robin Harley with UBS. Please go ahead.
Robin M. Farley: Great, thanks. I want to, To get a clarification your global pipeline © The Bulletproof Executive 2013, It looked like sequentially, or there wasn't really any.., and those sequentially. Was that just?
Scott Oaksmith: just to that quarter. Robin, you cut out a little bit in your second part of the question, and in your first part, I'll answer the first part, maybe you could repeat the second part. In terms of the global pipeline, our global pipeline from the end of the year was basically flat, just about 106,000 rooms down to 105,000 rooms. And really, that was a reflection of really the strong openings that we had during the year. And I think we talked about this on the last quarterly call, but we did have a cleanup of some of our pipeline in early Q1 of 2023, where we had taken a look at some contracts where, because coming out of the pandemic, we didn't think we were going to open in our new construction pipeline, knowing that it was a strong conversion environment where we could fill those markets with existing hotels. We made the one-time decision to terminate some hotels, knowing that we could sell into those markets and quickly realize those revenue streams.
Scott Oaksmith: So we've been focused on the sequential quarter-over-quarter growth, which we talked about was up 6% on a global basis. You made a comment about Q4, but unfortunately the audio cut out a little bit, so could you repeat that question? Sure, yeah, the Q4 was just your commentary about what you call the revenue intent segments, the extended stay. It looked like openings in Q4 were sort of, that there weren't really openings sequentially in Q4 from Q3 in those groupings. And I'm just wondering if that was seasonal or something just specific, for the, You know, just kind of.
Scott Oaksmith: And actually, Q4 is typically our largest openings quarter, quarter over quarter. So when you look at our September 30th results into, into the December 31st, we actually, you know, saw strong growth and all of our revenue intensive brands, you know, the Comfort brand, WoodSpring brand, all of our extended stay brands had quarter over quarter growth. So happy to take offline with what you're looking at.
Scott Oaksmith: But we saw strong opening growth, including a full year growth of 13% in our opening, Yeah, Robin, I see about 104 Q4 openings. That was a 4% increase year over year. So, . . .
Joseph R. Greff: I was just looking at the questions. Your next question comes from Joe Greff with J.P. Morgan. Please go ahead. Good morning, everybody.
Scott Oaksmith: Your royalty fees grew just under 9% year-over-year in 2023, actually, royalty licensing and management fees, that $513 million level. If I reverse engineer your 2024 outlook, I'm getting to something that's an accelerating level of growth in that line item. Is that how you're?
Scott Oaksmith: looking at things based on some of the drivers that you've given and some of the drivers that maybe are underlying that overall assumption for Evadagro. Yeah, if you take a look at our drivers this year, so our REBPAR was at an increase for the full year of 0.1%. Our revenue-intensive unit growth was about 1.8%. And we grew our effective royalty rate in the mid-single digit. So we are expecting a slight acceleration of that, with REBPAR increasing 1%, our revenue-intensive net unit growth being at approximately 2%. And the royalty rate should be effectively about flat year-over-year as far as the terms of growth, but up mid-single digits again. So there is some acceleration in that.
Scott Oaksmith: We also – there is a small portion of our corporate credit card that's in there in the licensing fees that will be driving a piece of that number as we continue to realize the benefits from the co-branded credit card with Wells Fargo. And lastly, strong international growth continued in that number, should make that number grow a little bit, faster pace than it did in 2023. Got it.
Joseph R. Greff: So that 9% growth rate in royalties and other fees should grow at a faster growth in 2024. Just making sure I'm hearing you correctly. The overall percentages may not be there, and we have some a little bit of, in the 2023, you know, that royalty rate, that royalty number percentage was against a Radisson acquisition that only had a little over Q4 and a little partial Q3. But if you look at the fundamentals, it's kind of the year over year of our portfolio, you know, the unit growth, the rev par, and the effective royalty rate all should grow at a faster pace. That 9% is, you know, again, 2023 compared to 2022 when we acquired Radisson in August of 2022. So that number should be, would have been higher in 2023 than it will be in 2024. Got it.
Patrick Pacious: And just going now a couple of questions on the Wyndham proposal. I think it was Pat earlier in your prepared remarks, you referenced that you think we have confidence in a deal that could close in a customary timeframe. Can you put a little bit more flesh on the bone on that comment?
Patrick Pacious: Thinking different today versus a few months ago after having, you know, additional interactions with, uh, with regulatory. Yeah, sure, Joe. In fact, you know, we're, I mean, we're three months from from from all of that. So yes, we're getting actually closer to it. You know, when we say the customary timeframe, we we've been saying 12 months. But as I said, now, we're six weeks into the second request on the regulatory front. And that's going to be the long pole in the tent.
Patrick Pacious: And that's, you know, when we look at it from a second request to, to a final outcome, we've been told to expect anything from six to nine months. So as we're six weeks into that six to nine month timeframe, that's getting closer. And that's actually the thing when we talked to Wyndham shareholders, you know, they just want to understand not just around the regulatory environment itself, but also the timeframe involved in it. It's the reason or one of the reasons we put the exchange offer in place was to get the regulatory process moving, which we did in early December. So here we sit late February, we're getting, you know, closer to having some clarity for shareholders around that regulatory question, and more importantly, the timing of it.
Patrick Pacious: So that's what we've been told to sort of expect from, you know, just precedent and sort of how long these processes take. But if you're looking at that six to nine month timeframe from January 12, when the second request began, we're moving pretty rapidly down that path. Great. And then a follow up on your work on the pursuit of Lyndon. To what extent are, Pat, are you, management, the board, Your advisor is working on finding potential buyers of newly issued equity in a pro-forma company that helped fund a deal with, say, a greater cash consideration than what you have on the table now and also with then lower pro-forma debt. Obviously, that kills two of three concerns, i.e.
Patrick Pacious: not regulatory, but two or three concerns get mitigated from Wyndham's perspective. It's also hard not to recognize that you brought in Goldman kind of later in the process at some point at the end of last year. So to what extent is that a priority, and to what extent can you share with us conversations on selling new equity and whether Stewart would be potentially involved in investing more into a pro-forma company? Yeah, Josh, you're gonna quite imagine I'm not going to negotiate with you, but we'd be happy to have the conversations you just laid out with the Wyndham board if they would, in fact, engage with us. You know, I would say from the from the get go, we've been looking at, you know, really three things here, which is, you know, what is the price that that is the right price to pay? As we said, from the beginning, we're offering Wyndham a premium, and an earnings multiple, the implied earnings multiple that never achieved before. So we feel like we're good on that.
Patrick Pacious: You know, the mix between equity and cash is something as we've talked to their shareholders, they like the transaction and they like the equity. So providing the equity and the cash mix is is something that we feel like we're in a good place today. There's certainly an opportunity to to look at that a second time as we get into an engagement with them. And, you know, certainly the leverage that we think both businesses can can handle, is is pretty high, given the high free cash flow generating characteristics that we see here. So there's opportunity to to look at this.
Patrick Pacious: I can tell you, we've looked at a lot of different factors to to get to the right mix of those three issues. But, you know, I think when you look at the offer that we have on the table today, when you look at the feedback we've gotten from the Wyndham shareholders, with regard to getting a transaction done, there is a there's a high level of confidence that we're in that range of of a good, good offer that's on the table. And as I said, that offer can be improved, you know, if we get two things engagement and due diligence. Thank you very much. Your next question comes from Meredith Jensen with HSBC. Please go ahead. Yes, hi.
Meredith Jensen: I was wondering if you could speak a little bit more about the retention rate, maybe by chain scale and domestic and international, just sort of breaking it down a little bit and maybe a look over time and what maybe some goals are. And then I was looking back at something from last quarter, you had mentioned a strategic partnership in Mexico. And I was wondering if that is just part of some of the other discussions or I just wanted to match that up with some of the international growth strategies mentioned today. Thanks. Sure, Mara.
Patrick Pacious: I think when you look at our retention rate, I mean, we've historically had a very high retention rate, 97, 98% is what it sits today. Obviously, we are, you know, looking to constantly improve our brands. And there are, you know, times when, you know, the franchisees are either not willing to invest in a brand or are, you know, taking their hotel and making it into an alternative use.
Patrick Pacious: So those are generally high drivers of where we see franchisee churn. And a lot of that is occurring, particularly the non-hotel use conversion is occurring in that economy transient segment. So that's where you see a higher churn rate than you do in the other segments that we operate in. In terms of international, I would say our churn rate is similar to the U.S. Most of our brands overseas are ring brands, so don't have the high churn that we have in the economy segment.
Patrick Pacious: So if you model out the similar churn rate as our revenue-intensive brands, that would be a good starting point. As Pat mentioned, you know, we are guiding to revenue intensive unit growth of 2%. And while we will see our economy, Units decline with the overall industry, we do expect to have positive overall net unit growth for the year in 2024. And I think with regard to your question for the partnership in Mexico, you know, that's an opportunity that I would, I would, I would place it more in the category of a platform opportunity, similar to what we do with Blue Green. And what we had with the AMR portfolio several years ago, it's really an opportunity to have their distribution on our platform and have our customers have an earn and burn opportunity through the loyalty program.
Patrick Pacious: Great. Thanks. And just on the blue-green point, you had mentioned last quarter that you had anticipated that after the sale, the partnership would continue just as it has. And it seems like from your comments, that continues to be the case. We should just assume it goes on despite the change. That's correct. Okay, great. Thanks so much. Your next question comes from Patrick Scholes with Truist. Please go ahead. Patrick Scholes, your line is open.
Operator: Your next question comes from Brent Montour with Barclays. Please go ahead. Hey, thanks. Thanks, everyone, for taking my questions. The first one is just on RevPAR.
Patrick Scholes: Your Q4 RevPAR domestically came in a little bit below what we had sort of thought was implied by STRs, chain-scale results, and then your full-year guide of flat up to is also a little bit below STRs forecast, which for mid-scale and upper mid-scale is closer to 3%. So I guess I'm curious if, one, in the fourth quarter, if there was any sort of share loss or anything else you want to call out and then looking for, you know, do you have a sort of different outlook on the U.S., which is, you know, conservative or anything, or how would you describe your particular outlook for RevPAR? Yeah, in terms of the fourth quarter, I think really, we had really tougher comps, as we've, as we said, in our scripted remarks that we were the first hotel company to return and exceed the 2019 levels. So when you look at our Q4 results against 2019, we're up 13%, which is the leader in the industry. So I think, you know, we didn't see anything different than the industry. I just think our comps were, were tougher there.
Operator: In terms of the full year, I would say we're probably a little bit conservative on our, our guidance compared to STR in 2024. You know, we do see a lot of, I mentioned earlier, the long term fundamentals, the, The, The growth that we expect to see, as I mentioned, we're still 110 basis points down in occupancy against 2019. So it's been a rate-driven.
Brent Montour: We do expect business travel to come back and get back to 2019 levels coming here in 2024 and 2025. And we're really excited about a new partnership with AAA. And AAA represents 31% of all room nights.
Scott Oaksmith: And we just became one of their preferred partner in the mid-scale economy space. So we're excited about what the growth can be for the year. And we feel like we'll be in line with industry. And I would just say when we look at FTR, and then we look at some of the other forecasts that we we consider when we make our in-house forecast, they do appear to be, and I think many in the industry have sort of looked at it, and so they appear to be a little more aggressive than maybe most in the industry are considering. So it's just one of the forecasts we do look at when we make our decisions around how we're going to put out our own internal forecast and then ultimately put that into our guide, That makes sense. Thanks for that.
Scott Oaksmith: And then just a second follow up on, you guys gave us a fair amount of color on churn. But I'm curious on the Radisson brands, those two together, those did decline a touch quarter over quarter. You know, when does that bottom and start to grow, you know, the two brands together?
Patrick Pacious: And what have you sort of baked into the full year expectations, the guidance you gave for net unit growth? Yeah, I think when you look at Country Inn & Suites, I mean, that's a brand that, you know, and we've said all along, let me just start with the fact that when you when you do these acquisitions, you got to get the performance fixed. And then you do that.
Patrick Pacious: And that leads to franchisee interest, which leads to development and growth. In the case of Country Inn & Suites and Radisson, you know, the green sign Radisson, we are, we have fixed the performance issues. I think on the Country Inn & Suites side, we're already seeing that momentum, as we talked about, you know, we saw 19 agreements last year, 10 of those in December alone. That's the highest that brand had done since 2016.
Patrick Pacious: So we feel really confident about the Country Inn & Suites growth coming in 2024. Now, a lot of that's new construction, so it's still up against a higher interest headwind, but we feel really good about the developer interest. The Radisson green sign, the full service Radisson, is likely going to continue to see some decline in 2024, with a reversal of that and growth coming in 2025. And that's a function primarily of just those are generally more urban hotels, larger boxes, and the timeframe that they are, they take when they, when they change flags is much more elongated.
Patrick Pacious: So it's really a function of timing rather than anything else, I think, on when Country coming back this year 2024, and then Radisson green sign returning to growth in 2025. That's super helpful. Thanks everyone. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. There are no further questions at this time, please proceed. Thank you, operator. Thanks again, everyone, for your time this morning. We'll talk to you again in May when we announce our first quarter results. Have a great day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
All lines are in listen only mode.
I will now turn the conference over to Ali Somers Investor Relations Senior director for choice hotels.
Good morning, and thank you for joining us today before we begin we'd like to remind you that during this conference call certain predictive or forward looking statements will be used to assist you in understanding the company and its results.
Actual results may differ materially from those indicated in forward looking statements and you should consult the company's forms 10-Q, 10-K, and other SEC filings for information about important risk factors affecting the company that you should consider.
These forward looking statements speak as of today's date, and we undertake no obligation to publicly update them to reflect subsequent events or circumstances.
You can find a reconciliation of our non-GAAP financial measures referred to in our remarks as part of our fourth quarter and full year 2020 free earnings press release, which is posted on our website of choice hotels Dot com under the Investor Relations section.
This morning, Pat patients, our President and Chief Executive Officer, who will speak to our fourth quarter operating results and full year highlights, while Scott Ochsner, Chief Financial Officer will discuss our financial performance in 2024 outlook. Joining US also today for the Q&A portion of the call is.
Operator: The Ultimate Parody Site! Our remarks as part of our fourth quarter and full year 2023 earnings press release, which is posted on our website at choicehotels.com under the investor relations section. This morning, Pat Pacious, our President and Chief Executive Officer, will speak to our fourth quarter operating results and full year highlights, while Scott Oaksmith, our Chief Financial Officer, will discuss our financial performance and 2024 out. Also joining us today for the Q&A portion of the call is Dom Dragisich, Executive Vice President, Operations and Chief Global Brand Officer. Following our prepared remarks, we'll be glad to answer your questions. And with that, I'll turn the call over to Ali. Thank you, Ali. And good morning, everyone.
Yes.
Tom drag is it executive Vice President operations, and Chief Global brand Officer.
Following our prepared remarks, we'll be glad to answer your questions and with that I'll turn the call over to Pat.
Thank you Ali and good morning, everyone. We appreciate you taking the time to join us.
2023 was a year of accelerating growth.
We delivered record financial performance as we exceeded the top end of our guidance with a 13% year over year increase in adjusted EBITDA to $545 million.
A 16% year over year increase in adjusted EPS to $6 11.
And a unit growth ahead of our expectations led by our successful strategy of adding hotels that generate higher royalties per unit.
In 2023, we significantly expanded our rewards program increased our geographic reach.
<unk> new value through our platform capabilities.
And created step function growth through the rapid completion of the Radisson Americas integration.
This positive momentum combined with projected unit growth acceleration and supported by our superior hotel conversion capability.
In our remarks as part of our first quarter and full year 2020 free earnings press release, which is posted on our website at choice hotels Dot com under the Investor Relations section.
Gives us confidence in achieving our expected adjusted EBITDA growth of 10% in 2024, which is captured in our current guidance range.
Speaker Change: This morning paths patient's our president and Chief Executive Officer, who will speak to our fourth quarter operating results and full year highlights lets called Oak Smith, Chief Financial Officer will discuss our financial performance and 2024 outlook. Joining US also today for the Q&A portion of the call.
I will begin today by discussing what drove our impressive fourth quarter and full year 2023 results and then discuss our proposal to acquire Wyndham hotels and resorts.
It is the growth drivers of our current business that underpins the confidence we have in our ability to unlock the significant value for shareholders franchisees and guests that we see in the combination with Wyndham.
Chuck Smith: Dragovich Executive Vice President operations, and Chief Global brand Officer.
Chuck Smith: Following our prepared remarks, we'll be glad to answer your questions and with that I'll turn the call over to Pat.
Patrick Pacious: We appreciate you taking the time to join us. 2023 was a year of accelerating growth. We delivered record financial performance as we exceeded the top end of our guidance with a 13% year-over-year increase in adjusted EBITDA to $540.5 million, a 16% year-over-year increase in adjusted EPS to $6.11, and unit growth ahead of our expectations, led by our successful strategy of adding hotels that generate higher royalties per unit. In 2023, we significantly expanded our rewards program, increased our geographic reach, unlocked new value through This positive momentum, combined with projected unit growth acceleration and supported by our superior hotel conversion capability, gives us confidence in achieving our expected adjusted EBITDA growth of 10% in 2024, which is captured in our current guidance range.
Pat: Thank you Ali and good morning, everyone. We appreciate you taking the time to join us.
Our distinct growth strategy supported by our best in class Franchising business engine drove adjusted full year, 2023, EBITDA, 13% higher than the prior year and 45% higher than in 2019.
Pat: 2023 was a year of accelerating growth, we delivered record financial performance as we exceeded the top end of our guidance with a 13% year over year increase in adjusted EBITDA to $545 million.
This continues our consistent track record of delivering double digit profitability growth year after year.
Pat: A 16% year over year increase in adjusted EPS to $6.11.
We have positioned the company to build on this performance in 2024 and beyond as we continue to grow our franchise business with hotels that generate higher royalties per unit, while leveraging the investments we've made in our systems to further improve the franchisees' profitability.
Pat: And unit growth ahead of our expectations led by our successful strategy of adding hotels that generate higher royalties per unit.
Pat: In 2023, we significantly expanded our rewards program increased our geographic reach.
In line with our previously communicated outlook, we expect to grow our full year 2024, adjusted EBITDA to $590 million at the midpoint of the guidance range.
Pat: <unk> new value through our platform capabilities.
Pat: And created step function growth through the rapid completion of the Radisson Americas integration.
Choices strong growth is fueled by the successful execution of our key strategies, which demonstrate the versatility of our business model.
Patrick Pacious: I will begin today by discussing what drove our impressive fourth quarter and full year 2023 results and then discuss our proposal to acquire Wyndham Hotels and Resorts, because it is the growth drivers of our current business that underpin the confidence we have in our ability to unlock the significant value for shareholders, franchisees, and guests that we see in the combination with Windows. Our distinct growth strategy, supported by our best in class franchising business engine, drove adjusted full year 2023 EBITDA 13% higher than the prior year and 45% higher than in 2019. This continues our consistent track record of delivering double-digit profitability growth year after year. We have positioned the company to build on this performance in 2024 and beyond as we continue to grow our franchise business with hotels that generate higher royalties per unit, while leveraging the investments we've made in our systems to further improve the profitability of our franchisees. In line with our previously communicated outlook, we expect to grow our full-year 2024 adjusted EBITDA to $590 million at the midpoint of the guidance. Choice's strong growth is fueled by the successful execution of our key strategies, which demonstrate the versatility of our business model. We have multiple growth drivers, each uniquely contributing to our performance. These include the following.
Pat: This positive momentum combined with projected unit growth acceleration and supported by our superior hotel conversion capability gives us confidence in achieving our expected adjusted EBITDA growth of 10% in 2024, which is captured in our current guidance range.
We have multiple growth drivers.
Each uniquely contributing to our performance.
These include the following.
First driving the growth of our brand portfolio with a focus on hotels that generate higher than brand average royalty per unit.
Pat: I will begin today by discussing what drove our impressive fourth quarter and full year 2023 results and then discuss our proposal to acquire Wyndham hotels and resorts.
Second increasing the velocity of hotel openings through our best in class Hotel conversion capability.
Which is our distinct advantage in today's development environment.
Pat: Because it is the growth drivers of our current business that underpin the confidence we have in our ability to unlock the significant value for shareholders franchisees and guests that we see in the combination with Wyndham.
Third expanding our geographic growth internationally, where we more than doubled our EBITDA contribution for the year.
Fourth further bolstering our platform capabilities through strategic partnerships and other and ciliary revenue opportunities.
Pat: Our distinct growth strategy supported by our best in class Franchising business engine drove adjusted full year, 2023, EBITDA, 13% higher than the prior year and 45% higher than in 2019.
And finally <unk>.
Creating outsized value through the successful integration of new businesses, most recently Radisson Americas.
Our distinct unit growth strategy continues to deliver results and enhances the attractiveness of our brands.
Pat: This continues our consistent track record of delivering double digit profitability growth year after year.
Since we embarked on our strategy of focusing our franchise business on more revenue intense units six years ago.
Pat: We have positioned the company to build on this performance in 2024 and beyond as we continue to grow our franchise business with hotels that generate higher royalties per unit, while leveraging the investments we've made in our systems to further improve the franchisees' profitability.
We have increased our hotel mix of higher revenue generating hotels by eight percentage points and they now comprise 82% of our total domestic portfolio.
Patrick Pacious: First, driving the growth of our brand portfolio with a focus on hotels that generate higher than brand average royalties per unit. Second, increasing the velocity of hotel openings through our best-in-class hotel conversion capability, which is our distinct advantage in today's development environment. Third, expanding our geographic growth internationally, where we more than doubled our EBITDA contribution for the year.
Pat: In line with our previously communicated outlook, we expect to grow our full year 2024, adjusted EBITDA to $590 million at the midpoint of the guidance range.
Importantly, we expect this mix shift to continue to grow in the coming years.
These new revenue intense franchises are more accretive to our earnings.
And are a key driver of our future growth.
Pat: Choices strong growth is fueled by the successful execution of our key strategies.
This positive trend was evident in 2023, as we exceeded our unit growth guidance.
Pat: Which demonstrate the versatility of our business model.
In particular, we grew the number of choice legacy domestic rooms across these more revenue intense brands by two 4% year over year.
We have multiple growth drivers each uniquely contributing to our performance.
Patrick Pacious: Fourth, further bolstering our platform capabilities through strategic partnerships and other ancillary revenue opportunities. And finally, creating outsized value through the successful integration of new businesses, most recently Radisson America. Our distinct unit growth strategy continues to deliver results and enhances the attractiveness of our brand. Since we embarked on our strategy of focusing our franchise business on more revenue-generating units six years ago, we have increased our hotel mix of higher revenue-generating hotels by 8 percentage points, and they now comprise 82% of our total domestic portfolio. Importantly, we expect this mix shift to continue to grow in the coming years.
Pat: These include the following.
First driving the growth of our brand portfolio with a focus on hotels that generate higher than brand average royalty per unit.
Importantly, the new hotels, we added within a brand on average generated royalty revenue nearly 20% higher than hotels exiting the brand.
Pat: Second increasing the velocity of hotel openings through our best in class Hotel conversion capability.
At the same time, we executed new hotel openings at an impressive pace in.
Pat: Which is our distinct advantage in today's development environment.
In the fourth quarter, we averaged eight openings per week.
Pat: Third expanding our geographic growth internationally, where we more than doubled our EBITDA contribution for the year.
And this contributed to a 13% increase in openings in 2023 year over year.
Pat: Fourth further bolstering our platform capabilities through strategic partnerships and other and ciliary revenue opportunities.
With 263 domestic hotel openings.
In the current hotel development environment, our core competency of a best in class Hotel conversion capability has an even greater impact.
Pat: And finally.
Pat: Creating outsized value through the successful integration of new businesses, most recently Radisson Americas.
Patrick Pacious: These new revenue-intense franchises are more accretive to our earnings and are a key driver of our future growth. This positive trend was evident in 2023 as we exceeded our unit growth guidance. In particular, we grew the number of Choice Legacy Domestic Rooms across these more revenue-intensive brands by 2.4% year over year. Importantly, the new hotels we added within a brand, on average, generated royalty revenue nearly 20% higher than hotels exiting the brand. At the same time, we executed new hotel openings at an impressive pace. In the fourth quarter, we averaged eight openings per week.
Through our superior speed to market conversion process and best in class franchisee support we.
Pat: Our distinct unit growth strategy continues to deliver results and enhances the attractiveness of our brands.
We are able to move projects quickly through the pipeline.
Of all the domestic franchise agreements, we executed for conversion hotels in 2023, we opened 135 in the same year.
Pat: Since we embarked on our strategy of focusing our franchise business on more revenue intense units six years ago.
Pat: We have increased our hotel mix of higher revenue generating hotels by eight percentage points and they now comprise 82% of our total domestic portfolio.
We also expect this core competency to be a key growth driver in 2024 as developers continue to choose our brands specifically.
Specifically as of the end of the fourth quarter, we grew our global rooms pipeline for conversion hotels by 34% year over year and 16% quarter over quarter.
Pat: Importantly, we expect this mix shift to continue to grow in the coming years.
Patrick Pacious: And this contributed to a 13% increase in openings in 2023, year over year, with 263 domestic hotel openings. In the current hotel development environment, our core competency of a best-in-class hotel conversion capability has an even greater impact. Through our superior speed to market conversion process and best-in-class franchisee support, we are able to move projects quickly through the pipeline.
Pat: These new revenue intense franchises are more accretive to our earnings and are a key driver of our future growth.
In addition.
72% of the domestic agreements awarded in 2023 were for conversion hotels.
Pat: This positive trend was evident in 2023, as we exceeded our unit growth guidance.
We are especially pleased with the prospects for our Radisson upscale conversion brand given that each hotel generates on average six times more royalty revenue than our economy portfolio.
Pat: In particular, we grew the number of choice legacy domestic rooms across these more revenue intense brands by two 4% year over year.
Patrick Pacious: Of all the domestic franchise agreements we executed for conversion hotels in 2023, we opened 135 in the same year. We also expect this core competency to be a key growth driver in 2024 as developers continue to choose our brand. Specifically, as of the end of the fourth quarter, we grew our Global Rooms Pipeline for Conversion Hotels by 34% year-over-year and 16% quarter-over-quarter. In addition,
Fueling our success is our ongoing commitment to strengthening the value proposition, we provide to our franchise owners supported by significant investments in creating a best in class franchisee success system.
Pat: Importantly, the new hotels, we added within a brand on average generated royalty revenue nearly 20% higher than hotels exiting the brand.
In fact over the past decade, we have more than tripled the number of rewards program members and grew the direct online contribution to our franchisees by nearly 50%.
Pat: At the same time, we executed new hotel openings at an impressive pace.
In the fourth quarter, we averaged eight openings per week.
Pat: And this contributed to a 13% increase in openings in 2023 year over year.
Thanks to our portfolio being more attractive in 2023 alone. We organically grew our rewards program by 9% and increased new enrollment by 24% year over year.
Patrick Pacious: 72% of the domestic agreements awarded in 2023 were for conversion hotels. We are especially pleased with the prospects for our Radisson upscale conversion brand, given that each hotel generates, on average, six times more royalty revenue than our economy portfolio. Fueling our success is our ongoing commitment to strengthening the value proposition we provide to our franchise owners, supported by significant investments in creating a best-in-class franchisee success system. In fact, over the past decade, we have more than tripled the number of Rewards Program members and grown the direct online contribution to our franchisees by nearly 50 percent. Thanks to our portfolio being more attractive, in 2023 alone, we organically grew our rewards program by 9% and increased new enrollment by 24% year over year. And those growth numbers are exclusive of Radisson America's rewards program in 2020.
Pat: With 263 domestic hotel openings.
Pat: In the current hotel development environment, our core competency of a best in class Hotel conversion capability has an even greater impact.
And those growth numbers are exclusive of the Radisson Americas rewards program integration.
Pat: Through our superior speed to market conversion process and best in class franchisee support we.
Additionally, with our broader portfolio of hotels, we are strengthening our existing strategic partnerships.
Pat: We are able to move projects quickly through the pipeline.
For example, we became the first AAA preferred hotel supplier that has been added in a decade, which widens our distribution network to deliver more business to franchisees.
Pat: Of all the domestic franchise agreements, we executed for conversion hotels in 2023, we opened 135 in the same year.
Pat: We also expect this core competency to be a key growth driver in 2024 as developers continue to choose our brands specifically.
This partnership is particularly attractive given that AAA is 64 million members account for 31% of paid room nights annually across all hotel chains in North America.
Pat: Specifically as of the end of the fourth quarter, we grew our global rooms pipeline for conversion hotels by 34% year over year and 16% quarter over quarter.
Existing owners recognize the increasing value of our brands and choose to remain with choice as seen in our industry, leading voluntary franchisee retention rate of 98%.
Pat: In addition.
Pat: 72% of the domestic agreements awarded in 2023 were for conversion hotels.
Patrick Pacious: Additionally, with our broader portfolio of hotels, we are strengthening our existing strategic partners. For example, we became the first AAA preferred hotel supplier that has been added in a decade, which widens our distribution network to deliver more business to franchisees. This partnership is particularly attractive given that AAA's 64 million members account for 31% of paid room nights annually across all hotel chains in North America.
Our franchisees also continue to choose to grow their business with choice hotels.
Pat: We are especially pleased with the prospects for our Radisson upscale conversion brand given that each hotel generates on average six times more royalty revenue than our economy portfolio.
As half of the franchise agreements awarded last year were with existing or returning owners.
Furthermore, our brand equity is elevating.
Pat: Fueling our success is our ongoing commitment to strengthening the value proposition, we provide to our franchise owners supported by significant investments in creating a best in class franchisee success system.
2023 was a year, where J D power ranked two of our fastest growing new construction brands number one in guest satisfaction.
Patrick Pacious: Existing owners recognize the increasing value of our brands and choose to remain with Choice, as seen in our industry-leading voluntary franchisee retention rate of 98%. Our franchisees also continue to choose to grow their business with Choice Hotels, as half of the franchise agreements awarded last year were with existing or returning owners. Furthermore, our brand equity is increasing. 2023 was a year where J.D.
Cambria hotels in the upscale category and would spring suites in the economy extended stay category.
Pat: In fact over the past decade, we have more than tripled the number of rewards program members and grew the direct online contribution to our franchisees by nearly 50%.
Additionally, this past year, we successfully improved our guest satisfaction scores, while our franchisees continued to leverage our best in class training tools and solutions to deliver exceptional guest experiences.
Pat: Thanks to our portfolio being more attractive in 2023 alone. We organically grew our rewards program by 9% and increased new enrollment by 24% year over year.
Patrick Pacious: Power ranked two of our fastest growing new construction brands number one in guest satisfaction: Cambria Hotels in the Upscale category and Wood Spring Suites in the Economy Extended Stay category. Additionally, this past year, we successfully improved our guest satisfaction scores, while our franchisees continue to leverage our best-in-class training tools and solutions to deliver exceptional guest experiences. Turning now to our international business. 2023 was one of Choice's most successful years for international development, as the company expanded its global footprint across multiple markets. In the Scandinavian region, Choice extended its master franchise agreement with one of the largest hotel companies for an additional 10-year term.
Turning now to our international business 2023 was one of choices most successful years for international development as the company expanded its global footprint across multiple markets.
Pat: And those growth numbers are exclusive of the Radisson Americas rewards program integration.
In the Scandinavian region choice extended its master franchise agreement with one of the largest hotel companies for an additional 10 year term.
Pat: Additionally, with our broader portfolio of hotels, we are strengthening our existing strategic partnerships.
Pat: For example, we became the first AAA preferred hotel supplier that has been added in a decade, which widens our distribution network to deliver more business to franchisees.
In Spain, we secured a distribution partnership with a leading hotel chain.
In France, we signed an agreement that will double choices unit footprint in the region and in Australia, We acquired the franchise rights for a fellow pure play franchisor.
Pat: This partnership is particularly attractive given that AAA is 64 million members account for 31% of paid room nights annually across all hotel chains in North America.
Patrick Pacious: In Spain, we secured a distribution partnership with a leading hotel chain. In France, we signed an agreement that will double Choice's unit footprint in the region. And in Australia, we acquired the franchise rights for a fellow pure play franchise.
We believe we have a significant opportunity to further gain international market share and realize additional EBITDA growth in the coming years.
Pat: Existing owners recognize the increasing value of our brands and choose to remain with choice.
Moving onto our platform business, we are very encouraged by the traction we're gaining in our efforts to expand that business and are in ciliary revenue growth opportunities.
Patrick Pacious: We believe we have a significant opportunity to further gain international market share and realize additional EBITDA growth in the coming years. Moving on to our platform. We are very encouraged by the traction we're gaining in our efforts to expand that business and our ancillary revenue growth opportunities. One example we're very pleased with is the new co-brand credit card. This strategic partnership is a long-term tailwind given that it drives loyalty to our brands as our rewards members with credit cards stay with us on average four times as often as non-rewards members, and it delivers revenues based on cardholder spend. Since its launch, the co-brand program has exceeded expectations on new account signups and card spend.
Pat: As seen in our industry, leading voluntary franchisee retention rate of 98%.
Pat: Our franchisees also continued to choose to grow their business with choice hotels as.
One example, we're very pleased with is the new co brand credit cards.
This strategic partnership is a long term tailwind given that it drives loyalty to our brands as our rewards members with credit cards stay with us on average four times as often as non rewards members.
As half of the franchise agreements awarded last year were with existing or returning owners.
Pat: Furthermore, our brand equity is elevating.
Pat: 2023 was a year, where J D power ranked two of our fastest growing new construction brands number one in guest satisfaction.
And it delivers revenues based on cardholder spend.
Since its launch the co brand program has exceeded expectations on new account sign ups and card spend.
Pat: Cambria hotels in the upscale category and would spring suites in the economy extended stay category.
The higher quality of our portfolio is resonating not only with current guests.
Pat: Additionally, this past year, we successfully improved our guest satisfaction scores, while our franchisees continued to leverage our best in class training tools and solutions to deliver exceptional guest experiences.
It also is starting to attract new guests, who have not considered our brands in the past.
Patrick Pacious: The higher quality of our portfolio is responding, not only with current gaps, but also is starting to attract new guests who have not considered our brands in the past. This evolving customer base gives us the ability to continue to attract more travel and blue chip national brands as partners, such as our recent partnership with Tesla and Grubhub. We are very pleased with our successful acquisition of the Radisson Americas brands, which outperformed our underwritten expectations. The seamless and faster-than-anticipated integration process is now complete.
This evolving customer base gives us the ability to continue to draw more travel and blue chip national brands as partners.
Pat: Turning now to our international business 2023 was one of choices most successful years for international development as the company expanded its global footprint across multiple markets.
Such as our recent partnership with Tesla.
And Grubhub.
We are very pleased with our successful acquisition of the Radisson America's brands, which outperformed our underwritten expectations.
Pat: In the Scandinavian region choice extended its master franchise agreement with one of the largest hotel companies for an additional 10 year term.
The seamless and faster than anticipated integration process is now complete.
Pat: In Spain, we secured a distribution partnership with a leading hotel chain.
Patrick Pacious: In 2023, we meaningfully enhance the performance of the existing Radisson Americas hotels, which is the first step in any successful integration. Specifically, upon integration of the digital channels through Year End, we drove over a 20% increase in domestic bookings for the Radisson brands year over year, with particularly strong results for the Country Inn & Suites brand, which grew by over 30%. This growth in direct digital business was driven in part by the higher traffic and booking conversion rate, which in turn had the added benefit of lowering customer acquisition costs for our franchising. The significant performance lift since digital integration is already attracting new hotel development commitments. In fact, the 19 domestic franchise agreements awarded for the country and in suites by Radisson in 2023 with a most for that brand in seven years. And the pace of new development is accelerating, as over half of those agreements were executed in December alone.
In 2023, we meaningfully enhanced the performance of the existing Radisson Americas hotels, which is the first step in any successful integration.
Pat: In France, we signed an agreement that will double choices unit footprint in the region and in Australia, We acquired the franchise rights for a fellow pure play franchisor.
Specifically upon integration of the digital channels through year end, we drove over a 20% increase in domestic bookings for the Radisson America's brands year over year, with particularly strong results for the country Inn and suites brand, which grew by over 30%.
Pat: We believe we have a significant opportunity to further gain international market share and realize additional EBITDA growth in the coming years.
Pat: Moving onto our platform business, we are very encouraged by the traction we're gaining in our efforts to expand that business and are in ciliary revenue growth opportunities.
This growth in direct digital business was driven in part by the higher traffic and booking conversion rates, which in turn have the added benefit of lowering customer acquisition cost for our franchisees.
Pat: One example, we're very pleased with is the new co brand credit cards.
Pat: This strategic partnership is a long term tailwind given that it drives loyalty to our brands as our rewards members with credit cards stay with us on average four times as often as non rewards members.
The significant performance lift since digital integration is already attracting new hotel development commitments.
In fact, the 19 domestic franchise agreements awarded for the country and in suites by Radisson brand in 2023 with a most for that brand in seven years.
Pat: And it delivers our revenues based on cardholder spend.
Pat: Since its launch the co brand program has exceeded expectations on new account sign ups and card spend.
Patrick Pacious: The excitement generated by the Radisson Americas business unit is further underlined by its RevPAR performance. For full year 2023, the Radisson Upscale brand RevPAR grew 9% year over year, outperforming the STR Upscale segment by approximately two percentage points, and achieved REBPAR index share gains versus competitors. At the same time, we've also been able to lower distribution costs for Legacy Choice and Radisson Americas franchise owners by negotiating improved terms with a key third-party distribution partner. This has helped lower the overall franchisee's operating costs, which is critical in a time of high labor costs and interest.
And the pace of new development is accelerating as over half of those agreements were executed in December alone.
Pat: The higher quality of our portfolio is resonating not only with current guests, but also is starting to attract new guests who have not considered our brands in the past.
The excitement generated by the Radisson Americas business unit is further underlined by Revpar performance.
Pat: This evolving customer base gives us the ability to continue to draw more travel and blue chip national brands as partners.
For full year 2023, the Radisson upscale brand Revpar grew 9% year over year outperforming the STR upscale segment by approximately two percentage points and.
Such as our recent partnership with Tesla and Grubhub.
Pat: We are very pleased with our successful acquisition of the Radisson America's brands, which outperformed our underwritten expectations.
And achieving Revpar index share gains versus competitors.
At the same time, we've also been able to lower distribution costs for legacy choice and Radisson Americas franchise owners by negotiating improved terms with our key third party distribution partner.
Pat: The seamless and faster than anticipated integration process is now complete.
Pat: In 2023, we meaningfully enhanced the performance of the existing Radisson Americas hotels, which is the first step in any successful integration.
This has helped lower the overall franchisees operating cost, which is critical in a time of high labor costs and interest rates.
Patrick Pacious: Additionally, thanks to our integration expertise and strategic investments in our state-of-the-art proprietary technology. We have achieved $85 million in annual recurring synergies, exceeding our original target by over 6%. We are now moving into the second phase of creating value from the acquisition by growing the Radisson Americas portfolio in the Americas region. Now that our unique and compelling franchisee success model is in place, we are starting to see momentum in franchisee interest across the combined portfolio. As we have discussed, the Radisson Americas acquisition has meaningfully enhanced our growth profile as it created a step-function change in the size of our business, expanded our rewards program, extended our co-brand credit card opportunity, increased our geographic reach in the Americas region, and opened new incremental earnings. This combination benefits all of our guests by giving them more options across the Choice Network and providing them with more incentives through our membership program. We now have 64 million Choice Privileges members who book directly with our franchisees, drive more revenue, and return more often than non-members, which translates to lower customer acquisition costs and higher margins for our franchisees.
Pat: Specifically upon integration of the digital channels through year end, we drove over a 20% increase in domestic bookings for the Radisson America's brands year over year.
Additionally, thanks to our integration expertise and strategic investments in our state of the art proprietary technologies.
We have achieved $85 million in annual recurring synergies.
Pat: With particularly strong results for the country Inn, and suites brand, which grew by over 30%.
Exceeding our original target by over 6%.
Pat: This growth indirect digital business was driven in part by the higher traffic and booking conversion rates, which in turn have the added benefit of lowering customer acquisition cost for our franchisees.
We are now moving into the second phase of creating value from the acquisition by growing the Radisson Americas portfolio in the Americas region.
Now that our unique and compelling franchisee success model is in place we are starting to see momentum in franchisee interest across the combined portfolio.
Pat: The significant performance lift since digital integration is already attracting new hotel development commitments.
As we have discussed the Radisson Americas acquisition has meaningfully enhanced our growth profile as it created a step function change in the size of our business.
Pat: In fact, the 19 domestic franchise agreements awarded for the country and in suites by Radisson brand in 2023 with a most for that brand in seven years.
Expanded our rewards program.
<unk> extended our co brand credit card opportunity.
Pat: And the pace of new development is accelerating as over half of those agreements were executed in December alone.
<unk> increased our geographic reach in the Americas region.
And opened new incremental earnings streams.
Pat: The excitement generated by the Radisson Americas business unit is further underlined by its Revpar performance.
Patrick Pacious: Additionally, as Radisson America's hotels start to fully leverage Choice's hotel profitability tools, we anticipate enhanced profitability as these target solutions drive savings of up to 20% on the franchisee level. We believe we have proven our ability to unlock incremental value through the combination that neither would have accomplished on its own. We are confident in our ability to replicate this great achievement with the Wyndham combination.
This combination benefits all of our guests by giving them more options across the choice network and providing them with more incentives through our membership program.
Pat: For full year 2023, the Radisson upscale brand Revpar grew 9% year over year.
We now have 64 million choice privileges members, who book directly with our franchisees drive more revenue and return more often than non members.
Pat: Outperforming the STR upscale segment by approximately two percentage points.
Pat: And achieving Revpar index share gains versus competitors.
Which translates to lower customer acquisition costs and higher margins for our franchisees.
Pat: At the same time, we've also been able to lower distribution costs for legacy choice and Radisson Americas franchise owners by negotiating improved terms with our key third party distribution partner.
Patrick Pacious: Given our expertise and capabilities in acquiring and integrating hotel brands, our demonstrated track record of improving the delivery of direct business to franchisees, and our successful strategy of growing our portfolio with hotels that generate higher royalties per year, with regard to our proposal to acquire Wyndham, we remain committed to this compelling, pro-competitive combination. At its core, our proposed combination with Wyndham is driven by the natural fit of the two companies coming together to accelerate value creation for all stakeholders. It offers compelling value for Wyndham shareholders today with an opportunity to meaningfully enhance the combined company's value as we realize synergies and drive additional growth. Importantly, we are confident that we can complete the transaction given our well-positioned, low-leverage balance sheet and continued progress on the regulatory front. For Choice shareholders, our proposal provides significant financial and strategic benefits. Wyndham shareholders would receive a substantial premium and immediate value for their shares without the execution risk associated with Wyndham's standalone strategy. Importantly, the proposal represents a multiple that Wyndham would never achieve absent COVID disruption.
Additionally, as Radisson Americas hotels start to fully leverage choices hotel profitability tools, we anticipate enhanced profitability as these targets solutions drive savings of up to 20% on the franchisee level.
Pat: This has helped lower the overall franchisees operating cost, which is critical in a time of high labor costs and interest rates.
We believe we have proven our ability to unlock incremental value through the combination that neither would have accomplished on its own.
Pat: Additionally, thanks to our integration expertise and strategic investments in our state of the art proprietary technologies.
Pat: We have achieved $85 million in annual recurring synergies exceeding our original target by over 6%.
We are confident in our ability to replicate this great achievement with the Wyndham combination.
Given our expertise and capabilities in acquiring and integrating hotel brands.
Pat: We are now moving into the second phase of creating value from the acquisition by growing the Radisson Americas portfolio in the Americas region.
Our demonstrated track record of improving the delivery of direct business to franchisees.
And our successful strategy of growing our portfolio with hotels that generate higher royalties per unit.
Pat: Now that our unique and compelling franchisee success model is in place we are starting to see momentum in franchisee interests across the combined portfolio.
With regard to our proposal to acquire Wyndham, we remain committed to this compelling pro competitive combination.
Pat: As we have discussed the Radisson Americas acquisition has meaningfully enhanced our growth profile as it created a step function change in the size of our business.
At its core our proposed combination with Wyndham is driven by the natural fit of the two companies coming together to accelerate value creation for all stakeholders.
Pat: Expanded our rewards program.
Pat: Extended our co brand credit card opportunity.
It offers a compelling value for Wyndham shareholders today with an opportunity to meaningfully enhance the combined company's value as we realize synergies and drive additional growth.
Pat: Increased our geographic reach in the Americas region, and opened new incremental earnings streams.
Patrick Pacious: In contrast, Choice historically trades at an attractive level, representing compelling consideration for Wyndham shareholders. The value we consistently generate for our shareholders is due in part to our strong growth profile and prudent balance sheet management. The combination of Choices and Wyndham's asset-light businesses is expected to generate significant cash flow available to rapidly reduce leverage while still investing for growth. Both sets of shareholders would have the opportunity to participate in more than $2 billion of incremental value creation expected from the $150 million in annual run rate synergies that we believe a combined company would unlock. This value would be unlocked by bringing Choice's best-in-class franchisee success model to the Wyndham Network. Regarding next steps, we are continuing to progress on the regulatory process as expected.
Pat: This combination benefits all of our guests by giving them more options across the choice network and providing them with more incentives through our membership program.
Importantly, we are confident that we can complete the transaction given our well positioned low leverage balance sheet and continued progress on the regulatory front.
Pat: We now have 64 million choice privileges members, who book directly with our franchisees drive more revenue and return more often than nonmembers.
For choice shareholders, our proposal provides significant financial and strategic benefits.
Wyndham shareholders would receive a substantial premium and immediate value for their shares without the execution risk associated with Wyndham Standalone strategy.
Pat: Which translates to lower customer acquisition costs and higher margins for our franchisees.
Pat: Additionally, as Radisson Americas hotels start to fully leverage choices hotel profitability tools, we anticipate enhanced profitability as these target solutions drive savings of up to 20% on the franchisee level.
Importantly, the proposal represents a multiple that Wyndham has never achieved absent COVID-19 disruptions.
In contrast choice historically trades at an attractive level, representing compelling consideration for Wyndham shareholders.
Patrick Pacious: We are confident that we are well positioned for regulatory approval and can complete the transaction in a customary time frame. Over the last six plus months, it has become clear that Wyndham's board is deeply entrenched and unwilling to take the actions that are in the best interest of their shareholders. In fact, their behavior is denying Wyndham shareholders the opportunity to realize significant value creation while receiving customary protection.
The value we consistently generate for our shareholders is due in part to our strong growth profile and prudent balance sheet management.
Pat: We believe we have proven our ability to unlock incremental value through the combination that neither would have accomplished on its own.
The combination of choices and Wyndham asset light businesses is expected to generate significant cash flow available to rapidly reduce leverage while still investing for growth.
Pat: We are confident in our ability to replicate this great achievement with the Wyndham combination.
Pat: Given our expertise and capabilities in acquiring and integrating hotel brands.
Pat: Our demonstrated track record of improving the delivery of direct business to franchisees and our successful strategy of growing our portfolio with hotels that generate higher royalties per unit.
Both sets of shareholders would have the opportunity to participate in more than $2 billion of incremental value creation expected from the $150 million in annual run rate synergies that we believe our combined company would unlock.
Patrick Pacious: As a result, we recently nominated a highly qualified slate of independent directors for election at Wyndham's 2024 annual meeting. If elected, these nominees are committed to their fiduciary duties and will act in the best interest of Wyndham's shareholders, which we believe is to move with urgency to maximize the value that can be created through a combined company. We're pleased that we've continued to receive positive feedback from both companies' shareholders, who see significant upside potential in this transaction and want to see Wyndham's board engaged in negotiations. Importantly, from the beginning, we have continued to see support from our franchisees. Wyndham has mischaracterized franchisee sentiment and who actually represents the franchisee. Our franchisees are represented by their own franchisee associations and advisory councils, and they elect the leaders of these groups to represent them.
With regard to our proposal to acquire Wyndham, we remain committed to this compelling pro competitive combination.
This value would be unlocked by bringing choices best in class franchisee success model to the Wyndham network.
Pat: At its core our proposed combination with Wyndham is driven by the natural fit of the two companies coming together to accelerate value creation for all stakeholders.
Regarding next steps, we are continuing to progress on the regulatory process as expected.
We are confident that we are well positioned for regulatory approval and can complete the transaction and a customary timeframe.
Pat: It offers a compelling value for Wyndham shareholders today with an opportunity to meaningfully enhance the combined company's value as we realize synergies and drive additional growth.
Over the last six plus months it has become clear that Wyndham board is deeply entrenched and unwilling to take the actions that are in the best interest of their shareholders.
Pat: Importantly, we are confident that we can complete the transaction given our well positioned low leverage balance sheet and continued progress on the regulatory front.
In fact their behavior is denying wyndham shareholders the opportunity to realize significant value creation, while receiving customary protections.
Patrick Pacious: They know our brands, they know our performance, and their feedback is vital to us. Our largest franchisee association, the Choice Hotels Owners Council, which represents over 3,000 Choice Hotels and has been working with Choice for more than 50 years to maximize profitability for hotel owners, recently shared with its members that there are multiple benefits for existing franchisees for Choice continuing to expand its brand portfolio. That Choice has always been thoughtful in its approach to acquisition, and that they believe Choice will prioritize franchisee benefits in any future acquisition. And I'm pleased to say that we are in the process of aligning with our franchisee associations on our plan of action, which would ensure that franchisees' needs are continuously prioritized as part of the proposed combination. We believe a combined company would deliver clear benefits to both Choice and Wyndham franchisees. These include lower hotel operating costs, less reliance on third-party distribution channels, and access to Choice's award-winning technology.
Pat: For choice shareholders, our proposal provides significant financial and strategic benefits.
As a result, we recently nominated a highly qualified slate of independent directors for election at Wyndham 2024 annual meeting.
Pat: Wyndham shareholders would receive a substantial premium and immediate value for their shares without the execution risk associated with Wyndham Standalone strategy.
If elected these nominees are committed to their fiduciary duties and we will act in the best interest of Wyndham shareholders, which we believe is to move with urgency to maximize the value of that can be created through our combined company.
Pat: Importantly, the proposal represents a multiple that Wyndham has never achieved absent COVID-19 disruptions.
Pat: In contrast choice historically trades at an attractive level, representing compelling consideration for Wyndham shareholders. The.
We're pleased that we've continued to receive positive feedback from both companies' shareholders, who see significant upside potential in this transaction and want to see Wyndham board engaged in negotiations.
Pat: The value we consistently generate for our shareholders is due in part to our strong growth profile and prudent balance sheet management.
Pat: The combination of choices and Wyndham asset light businesses is expected to generate significant cash flow available to rapidly reduce leverage while still investing for growth.
Importantly, since the beginning we have continued to see support from our franchisees.
Scott Oaksmith: Regarding the Asian American Hotel Owners Association, AHOA, we continue to have good conversations with and have been working with the organization's leaders for many years on a variety of topics aligned with its mission, including industry-related policy and legislative matters. In closing, we're looking forward to all we can accomplish as a combined company, and at the same time, we remain focused and committed to executing on each of Choice's growth drivers that I have described. We are a forward-looking company that takes deliberate actions and is adapting to the evolving industry landscape. The results we achieved in 2023 demonstrate the effectiveness of our growth strategy and confirm that our proactive approach in this changing environment is working. I'll now turn the call over to our CFO, Scott. Thanks, Pat. And good morning, everyone.
Wyndham has mischaracterized franchisee sentiment and who actually represents the franchisees.
Pat: Both sets of shareholders would have the opportunity to participate in more than $2 billion of incremental value creation expected from the $150 million in annual run rate synergies that we believe our combined company would unlock.
Our franchisees are represented by their own franchisee associations and advisory Council's.
And they elect the leaders of these groups to represent them.
No our brands they know our performance and their feedback is vital to us.
Pat: This value would be unlocked by bringing choices best in class franchisee success model to the Wyndham network.
Our largest franchisee association the choice hotels owners Council, which represents over 3000 choice hotels and has been working with choice for more than 50 years to maximize profitability for hotel owners recently shared with its members.
Pat: Regarding next steps, we are continuing to progress on the regulatory process as expected.
Pat: We are confident that we are well positioned for regulatory approval and can complete the transaction in a customary timeframe.
That there are multiple benefits for existing franchisees to choice continuing to expand its brand portfolio.
Pat: Over the last six plus months it has become clear that Wyndham board is deeply entrenched and unwilling to take the actions that are in the best interest of their shareholders.
Scott Oaksmith: Today, I will discuss our fourth quarter and full year 2023 results, update you on our balance sheet and capital allocation, and provide our outlook for 2024. Throughout my remarks today, I would like to note that all figures are inclusive of the Radisson Americas portfolio and exclude certain one-time items, including Radisson Americas integration costs, as well as transaction pursuit costs, which impacted our reported results. For full year 2023, a combination of higher than expected growth of the Choice legacy portfolio across our more revenue-intensive brands and markets, and strong, effective royalty rate growth. The successful integration of the Radisson Americas portfolio and the robust performance of our platform, procurement, and international businesses drove full-year adjusted EBITDA of $540.5 million, which exceeded our full-year guidance.
That choice has always been thoughtful and its approach to acquisitions.
And that they believe choice will prioritize franchisee benefits and any future acquisition.
Pat: In fact their behavior is denying wyndham shareholders the opportunity to realize significant value creation, while receiving customary protections.
And I am pleased to say that we are in the process of aligning with our franchisee associations on our plan of action, which would ensure that franchisees needs are continuously prioritize as part of the proposed combination.
Pat: As a result, we recently nominated a highly qualified slate of independent directors for election at Wyndham is 2024 annual meeting.
Pat: If elected these nominees are committed to their fiduciary duties and will act in the best interests of Wyndham shareholders, which we believe is to move with urgency to maximize the value that can be created through our combined company.
We believe.
The combined company would deliver clear benefits to both choice and Wyndham franchisees.
These include lower hotel operating costs.
Less reliance on third party distribution channels and access the choices award winning technology.
Pat: We're pleased that we've continued to receive positive feedback from both companies' shareholders, who see significant upside potential in this transaction and want to see Wyndham is board engaged in negotiations.
Regarding the Asian American Hotel owners Association or <unk>, we continue to have good conversations with and have been working with the organization's leaders for many years on a variety of topics aligned with its mission, including industry related policy and legislative matters.
Scott Oaksmith: Our full year at Jessup EBITDA represents a new record, eclipsing the one set last year, increasing 13% compared to 2022 and growing 45% compared to the same period of 2019, which was our pre-pandemic peak. Even excluding the contribution from Radisson Americas, our full year 2023 adjusted EBITDA grew over 8% on a comparable basis year over year. Our full year 2023 adjusted EPS also exceeded our previously issued guidance, reaching $6.11 per share, a 16% increase year over year.
Pat: Importantly, since the beginning we have continued to see support from our franchisees.
Pat: Wyndham has mischaracterized franchisee sentiment and who actually represents the franchisees.
In closing, we're looking forward to all we could accomplish as a combined company and at the same time, we remain focused and committed to executing on each of choices growth drivers that I have discussed.
Pat: Our franchisees are represented by their own franchisee associations and advisory Council's.
And they elect the leaders of these groups to represent them.
We are a forward looking company that takes deliberate actions and is adapting to the evolving industry landscape.
Pat: No our brands they know our performance and their feedback is vital to us.
The results we achieved in 2023 demonstrate the effectiveness of our growth strategy and confirm that our proactive approach in this changing environment is working on.
Pat: Our largest franchisee association the choice hotels owners Council, which represents over 3000 choice hotels and has been working with choice for more than 50 years to maximize profitability for hotel owners recently shared with its members.
Scott Oaksmith: For the fourth quarter of 2023, compared to the same period of 2022, our adjusted EBITDA grew 11% to $125 million, and our adjusted EPS increased 14% to $1.44 per share. Now, let me turn to our key revenue levers, which include our unit growth, royalty rate, and REBPAR performance. In terms of unit growth, our strategic goal has been to accelerate quality room growth across more revenue-intensive brands and markets while simultaneously growing our effective royalty rate, which ultimately results in an outsized increase in royalties. In addition to our mixed shift strategy for the broader portfolio, we are driving more revenue intensity at the individual hotel and brand level. In fact, new hotels we added within a brand generated an average of nearly 20% higher royalty revenue than hotels exiting the brand. For full year 2023, we reported domestic unit growth of 1.4% year-over-year across our more revenue-intense upscale, extended stay, and mid-scale portfolio, which exceeded our guidance. Additionally, our domestic system size of the more revenue-intense brands for the Choice legacy portfolio grew by 1.8% for units and 2.4% for rooms year-over-year.
I'll now turn the call over to our CFO Scott.
Thanks, Pat and good morning, everyone.
Today, I will discuss our fourth quarter and full year 2023 results.
Pat: That there are multiple benefits for existing franchisees to choice continuing to expand its brand portfolio.
<unk> on our balance sheet and capital allocation and provide our outlook for 2024.
Pat: That choice has always been thoughtful in its approach to acquisitions.
Throughout my remarks today I would like to note that all figures are inclusive of the Radisson Americas portfolio and excludes certain onetime items, including Radisson Americas integration costs as well as transaction pursuit costs, which impacted our reported results.
Pat: And that they believe choice will prioritize franchisee benefits in any future acquisition.
Pat: And I am pleased to say that we are in the process of aligning with our franchisee associations on our plan of action, which would ensure that franchisees needs are continuously prioritize as part of the proposed combination.
For full year 2023, a combination of higher than expected growth of the choice legacy portfolio across our more revenue intense brands and markets strong effective royalty rate growth success.
Pat: We believe our combined company would deliver clear benefits to both choice and Wyndham franchisees.
Successful integration of the Radisson Americas portfolio and the robust performance of our platform procurement and international businesses drove full year adjusted EBITDA of $545 million.
Pat: These include lower hotel operating costs.
Pat: Less reliance on third party distribution channels.
Pat: And access to choices award winning technology.
Which exceeded our full year guidance.
Pat: Regarding the Asian American Hotel owners Association, a hela, we continue to have good conversations with and have been working with the organization's leaders for many years on a variety of topics aligned with its mission, including industry related policy and legislative matters.
Our full year adjusted EBITDA represents a new record eclipsing the one set last year, increasing 13% compared to 2022 and growing 45% compared to the same period of 2019, which was our pre pandemic peak.
Even excluding the contribution from Radisson Americas, our full year 2023, adjusted EBITDA grew over 8% on a comparable basis year over year.
Pat: In closing, we're looking forward to all we could accomplish as a combined company and at the same time, we remain focused and committed to executing on each of choices growth drivers that I have discussed.
Scott Oaksmith: At the same time, our international portfolio increased by 2.6% for units and 2% for rooms year over year. We are particularly pleased with our outlook for international growth, as our international unit pipeline grew by 33% since the last quarter, more than doubling the number of hotels over the prior year. During 2023, we also leveraged our best-in-class conversion capability as we expanded our global rooms pipeline for conversion hotels by 16% since the last quarter and 34% over the prior year. I am pleased to report that our overall global rooms pipeline increased 6% quarter over quarter, reaching over 1,030 hotels, representing over 105,000 rooms at year-end.
Our full year 2023, adjusted EPS also exceeded our previously issued guidance, reaching $6 11 per share a 16% increase year over year.
Pat: We are a forward looking company that takes deliberate actions and is adapting to the evolving industry landscape.
For the fourth quarter of 2023 compared to the same period of 2022, our adjusted EBITDA grew 11% to $125 million.
Pat: <unk>, we achieved in 2023 demonstrate the effectiveness of our growth strategy and confirm that our proactive approach in this changing environment is working.
Our adjusted EPS increased 14% to $1 44 per share.
Pat: I'll now turn the call over to our CFO Scott.
Let me turn to our key revenue levers, which include our unit growth royalty rate and Revpar performance.
Scott: Thanks, Pat and good morning, everyone today, I will discuss our fourth quarter and full year 2023 results.
In terms of unit growth, our strategic goal has been to accelerate quality room growth across more revenue intense brands and markets, while simultaneously growing our effective royalty rates.
Scott: Update you on our balance sheet and capital allocation and provide our outlook for 2024.
Scott: Throughout my remarks today I would like to note that all figures are inclusive of the Radisson Americas portfolio and excludes certain onetime items, including Radisson Americas integration costs as well as transaction pursuit costs, which impacted our reported results.
Which ultimately results in an outsized increase in royalties.
Scott Oaksmith: This pipeline will serve as a strong platform for future growth. These results demonstrate that deliberate decisions and strategic investments in our franchisee tools, brand portfolio, and platform capabilities are resulting in strong returns across our company. First, we strengthen our upscaled franchises. For full year 2023, we grew our domestic upscale rooms portfolio by 6.3% year over year and expanded its domestic unit pipeline by 5% quarter over quarter. Second, we accelerate our growth across the extended State brands portfolio. For full year 2023, we grew our domestic extended stay unit system size by approximately 16% year over year, highlighted by over 60 new hotel openings, a record-breaking year. At the same time, our newest brand, Ever Home Suites, is gaining meaningful traction across the development community, with 69 domestic projects in the pipeline, including 16 under construction.
In addition to our mix shift strategy for the broader portfolio, we are driving more revenue intensity at the individual hotel and brand level across the system.
Scott: For full year 2023, a combination of higher than expected growth of the choice legacy portfolio across our more revenue intense brands and markets strong effective royalty rate growth.
In fact, new hotels, we added within a brand generated an average of nearly 20% higher royalty revenue than hotels exiting the brand.
Scott: Successful integration of the Radisson Americas portfolio and the robust performance of our platform procurement and international businesses drove full year, adjusted EBITDA of $545 million, which exceeded our full year guidance.
For full year 2023, we reported domestic unit growth of one 4% year over year across our more revenue intense upscale extended stay and mid scale portfolio, which exceeded our guidance.
Importantly, our domestic system size of the more revenue intense brands for the choice legacy portfolio grew by one 8% per units and two 4% for rooms year over year.
Scott: Our full year adjusted EBITDA.
Scott: It represents a new record eclipsing the one set last year, increasing 13% compared to 2022 and growing 45% compared to the same period of 2019, which was our pre pandemic peak.
At the same time, our international portfolio increased by two 6% for units and 2% per rooms year over year.
Scott: Even excluding the contribution from Radisson Americas, our full year 2023, adjusted EBITDA grew over 8% on a comparable basis year over year.
We are particularly pleased with our outlook for international growth as our international unit pipeline grew by 33% since the last quarter.
Scott: Our full year 2023, adjusted EPS also exceeded our previously issued guidance, reaching $6 11 per share a 16% increase year over year.
More than doubling the number of hotels over the prior year.
During 2023, we also leveraged our best in class conversion capability as we expanded our global rooms pipeline for conversion hotels by 16% since the last quarter and 34% over the prior year.
Scott: For the fourth quarter of 2023 compared to the same period of 2022, our adjusted EBITDA grew 11% to $125 million.
Scott Oaksmith: We remain very optimistic about our extended stay franchise business and expect the number of our extended stay units to increase at an average annual growth rate of approximately 15% over the next five years. Third, we continue to invest in our mid-scale portfolio. Within this category, we grew our domestic upper mid-scale rooms pipeline by 9% quarter over quarter.
I am pleased to report that our overall global rooms pipeline increased 6% quarter over quarter, reaching over 1030 hotels, representing over 105000 rooms at year end.
Scott: And our adjusted EPS increased 14% to $1 44 per share.
Scott: Let me turn to our key revenue levers, which include our unit growth royalty rate and Revpar performance.
This pipeline will serve as a strong platform for future growth.
These results demonstrate that the deliberate decisions and strategic investments and our franchisee tools brand portfolio and platform capabilities are resulting in strong returns across our company.
In terms of unit growth, our strategic goal has been to accelerate quality room growth across more revenue intense brands and markets, while simultaneously growing our effective royalty rates.
Scott Oaksmith: And for the fourth quarter, increase the number of domestic franchise agreements awarded by 6% year over year. Importantly, our first new comfort prototype opened in 2023, and our flagship brand continues to attract significant developer demand with over 130 projects in the domestic pipeline. And, fourth, our economy transient hotels are continuing to benefit from their improved value proposition.
Scott: Which ultimately results in an outsized increase in royalties.
First we strengthened our upscale franchise business for full year 2023, we grew our domestic upscale rooms portfolio by six 3% year over year and expanded its domestic unit pipeline by 5% quarter over quarter.
Scott: In addition to our mix shift strategy for the broader portfolio, we are driving more revenue intensity at the individual hotel and brand level across the system.
Scott: In fact, new hotels, we added within a brand generated an average of nearly 20% higher royalty revenue than hotels exiting the brands.
Second we accelerated our growth across the extended stay brands portfolio for full year 2023, we grew our domestic extended stay unit system size by approximately 16% year over year high.
Scott: For full year 2023, we reported domestic unit growth of one 4% year over year across our more revenue intense upscale extended stay and mid scale portfolio, which exceeded our guidance.
Highlighting by over 60, new hotel openings a record breaking year.
At the same time, our newest brand <unk> suites is gaining meaningful traction across the development community with 69 domestic projects in the pipeline, including <unk> under construction.
Scott: Importantly, our domestic system size of the more revenue intense brands for the choice legacy portfolio grew by one 8% for units and two 4% for rooms year over year.
Scott Oaksmith: As a result, we expanded our domestic economy transient unit pipeline by 9% quarter over quarter, and the new hotels we added in 2023 generated higher royalty revenue than the hotels. Our effective royalty rate also continues to be a significant source of revenue. Our domestic system effective royalty rate for full year 2023 increased six basis points year over year, representing nearly $6 million of incremental royalties, including a five basis point increase to 5.1% for the Choice Legacy brand. The third revenue lever I will discuss is our REP PAR program. Our full year 2023 domestic REB PAR increased 12.7% versus the same period of 2019 and 10 basis points year over year. Our fourth quarter domestic REB PAR increased 13.1% from the same quarter of 2019, including a 15.2% growth from the Choice Legacy portfolio. RepR was down 3.9% year-over-year in the quarter, reflecting tougher year-over-year comps as we were the first hotel company to return to and significantly exceed pre-pandemic RepR levels.
We remain very optimistic about our extended stay franchise business and expect a number of our extended stay units to increase at an average annual growth rate of approximately 15% over the next five years.
Scott: At the same time, our international portfolio increased by two 6% for units and 2% for rooms year over year.
Third we continue to invest in our mid scale portfolio within this category. We grew our domestic upper midscale rooms pipeline by 9% quarter over quarter.
Scott: We are particularly pleased with our outlook for international growth as our international unit pipeline grew by 33% since the last quarter and more than doubling the number of hotels over the prior year.
And for the fourth quarter increased the number of domestic franchise agreements awarded by 6% year over year importantly.
Scott: During 2023, we also leveraged our best in class conversion capability as we expanded our global rooms pipeline for conversion hotels by 16% since last quarter and 34% over the prior year.
Importantly, our first new comfort prototype opened in 2023, and our flagship brand continues to attract significant developer demand with over 130 projects in the domestic pipeline.
Scott: I am pleased to report better overall global rooms pipeline increased 6% quarter over quarter, reaching over 1030 hotels, representing over 105000 rooms at year end.
And fourth our economy transient hotels are continuing to benefit from their improved value proposition.
As a result, we expanded our domestic economy transient unit pipeline by 9% quarter over quarter and the new hotels, we added in 2023 generated higher royalty revenue and the hotels exiting.
Scott: This pipeline will serve as a strong platform for future growth.
Scott: These results demonstrate that the deliberate decisions and strategic investments and our franchisee tools brand portfolio and platform capabilities are resulting in strong returns across our company.
Okay.
Our effective royalty rate also continues to be a significant source of revenue growth our.
Scott: First we strengthened our upscale franchise business for full year 2023, we grew our domestic upscale rooms portfolio by six 3% year over year and expanded its domestic unit pipeline by 5% quarter over quarter.
Our domestic system effective royalty rate for full year, 2023 increased six basis points year over year, representing nearly $6 million of incremental royalties.
Including a five basis point increase to five 1% for the choice legacy brands.
Scott Oaksmith: While we expect to face tougher domestic comps at the start of this year, we expect REBPAR to increase as the year progresses. Given the favorable long-term business and leisure trends and the initiatives we put in place to capitalize on these tailwinds, we are pleased to report that our full-year 2023 International Portfolio-Wide REBPAR increased 11% year-over-year, with the Americas region excluding the U.S. growing 20% year
Second we accelerated our growth across the extended stay brands portfolio for full year 2023, we grew our domestic extended stay unit system size by approximately 16% year over year highlighted by over 60, New hotel openings a record breaking year at.
The third revenue lever I will discuss is our revpar performance.
Our full year 2023, domestic revpar increased 12, 7% versus the same period of 2019, and 10 basis points year over year.
Our fourth quarter domestic Revpar increased 13, 1% from the same quarter of 2019, including a 15, 2% growth from the choice legacy portfolio.
Scott: At the same time, our newest brand ever home suite is gaining meaningful traction across the development community with 69 domestic projects in the pipeline, including 16 under construction.
Revpar was down three 9% year over year in the quarter, reflecting tougher year over year comps as we were the first hotel company to return to and significantly exceed pre pandemic revpar levels.
Scott: We remain very optimistic about our extended stay franchise business and expect a number of our extended stay units to increase at an average annual growth rate of approximately 15% over the next five years.
Scott Oaksmith: At the same time, as a result of our strong organic growth and the acquisition of Radisson Americas, we more than doubled the EBITDA contribution from our international portfolio in 2023. We continue to build on the strong momentum of our platform business. Specifically, for full year 2023, we increased our platform and procurement services fees by 18% to $75.1 million year-over-year as we benefited from expanded offerings to our franchisees and Additional Annual Convention Revenues from Higher Attendance, increased transaction volume with our qualified vendors, and the broader reach of our initiatives.
While we expect to face tougher domestic comps at the start of this year.
Scott: Third we continue to invest in our mid scale portfolio within this category. We grew our domestic upper midscale roof pipeline by 9% quarter over quarter.
We expect revpar to increase as the year progresses, given the favorable long term business and leisure trends and the initiatives, we put in place to capitalize on these tailwind.
Scott: And for the fourth quarter increased the number of domestic franchise agreements awarded by 6% year over year.
We are pleased to report that our full year 2023 international portfolio wide Revpar increased 11% year over year with the Americas region, excluding the U S growing 20% year over year.
Accordingly, our first new comfort prototype opened in 2023, and our flagship brand continues to attract significant developer demand with over 130 projects in the domestic pipeline.
At the same time and as a result of our strong organic growth and the acquisition of Radisson Americas, we more than doubled the EBITDA contribution from our international portfolio in 2023.
Scott: And fourth our economy transient hotels are continuing to benefit from their improved value proposition.
Scott: As a result, we expanded our domestic economy transient unit pipeline by 9% quarter over quarter and a new hotels, we added in 2023 generated higher royalty revenue within the hotels exiting.
We continue to build on the strong momentum of our platform business.
Specifically for full year 2023, we increased our platform and procurement services fees by 18% to $75 $1 million year over year as we benefited from expanded offerings to our franchisees and guests.
Scott Oaksmith: We believe that we can drive this strong revenue growth in the years ahead as we continue to expand our platform and increase the number of products and services we offer to over 7,500 hotels, millions of guests, and other travel clients. I'd like now to turn to our well-positioned, low-leveraged balance sheet, marked by net debt to EBITDA of 2.9 times, which continues to be below the low end of our targeted range of 3 to 4 times. In 2023, we generated operating cash flows totaling nearly $300 million.
Okay.
Scott: Our effective royalty rate also continues to be a significant source of revenue growth our.
Additional annual convention revenues from higher attendance.
Scott: Our domestic system effective royalty rate for full year, 2023 increased six basis points year over year, representing nearly $6 million of incremental royalties, including.
Increased transaction volume with our qualified vendors and the broader reach of our initiatives.
We believe that we can drive the strong revenue growth in the years ahead as we continue to expand our platform and increase the number of products and services, we offer to over 7500 hotels millions of guests and other travel partners.
Scott: Including a five basis point increase to five 1% for the choice legacy brands.
Scott: The third revenue lever I will discuss is our revpar performance.
Scott: Our full year 2023, domestic revpar increased 12, 7% versus the same period of 2019, and 10 basis points year over year.
I'd like now to turn to our well positioned low leverage balance sheet marked by net debt to EBITDA of two nine times, which continues to be below the low end of our targeted range of three to four times.
Our fourth quarter domestic Revpar increased 13, 1% from the same quarter of 2019, including a 15, 2% growth from the choice legacy portfolio.
In 2023, we generated operating cash flows totaling nearly $300 million.
Scott Oaksmith: We also further enhanced our balance sheet in the fourth quarter, as we closed on a new $500 million term loan, which increased our liquidity to approximately $650 million as of year-end. We utilized our strong cash flows and underlevered balance sheet to continue to invest in the business. Generating impressive growth in our profitability, as well as acquiring over $110 million of Wyndham Common Stock. In 2023, we were also able to return over $422 million to shareholders, including nearly $57 million in cash dividends and $366 million in shares. We achieved all of this while remaining below our targeted leverage level. With our strong cash flow and ample debt capacity, we are committed to creating value for our shareholders by accretively investing to further expand our business and also effectively support the acquisition and successful integration of Windows. Our capital allocation priorities remain unchanged, and we are well-positioned to continue our long-term record of delivering outsized value for our shareholders.
We also further enhanced our balance sheet in the fourth quarter as we closed on a new $500 million term loan, which increased our liquidity to approximately $650 million as of year end.
Scott: Revpar was down three 9% year over year in the quarter, reflecting tougher year over year comps as we were the first hotel company to return to and significantly exceed pre pandemic revpar levels.
We utilized our strong cash flows and under Levered balance sheet to continue to invest in the business.
Scott: While we expect to face tougher domestic comps at the start of this year.
Scott: We expect revpar to increase as the year progresses, given the favorable long term business and leisure trends and the initiatives, we put in place to capitalize on these tailwind.
<unk> generated impressive growth in our profitability as well as acquiring over $110 million of Wyndham common stock.
In 2023, we were also able to return over $422 million to shareholders, including nearly $57 million in cash dividends and $366 million in share repurchases.
Scott: We are pleased to report that our full year 2023 international portfolio wide Revpar increased 11% year over year with the Americas region, excluding the U S growing 20% year over year.
We achieved all of this while remaining below our targeted leverage levels.
Scott: At the same time as a result of our strong organic growth and the acquisition of Radisson Americas, we more than doubled the EBITDA contribution from our international portfolio in 2023.
With our strong cash flow and ample debt capacity, we're committed to creating value for our shareholders by accretively investing to further expand our business and also effectively support the acquisition and successful integration of Wyndham.
We continue to build on the strong momentum of our platform business spin.
Scott: Specifically for full year 2023, we increased our platform and procurement services fees by 18% to $75 $1 million year over year as we benefited from expanded offerings to our franchisees and guests.
Our capital allocation priorities remain unchanged and we are well positioned to continue our long track record of delivering outsized value for our shareholders.
Our priority continues to be investing in our business to drive organic growth.
Scott: Additional annual convention revenues from higher attendance.
Scott: Increased transaction volume with our qualified vendors and the broader reach of our initiatives.
We will continue to make targeted investments in our business to drive growth focused on hotels that generate higher royalties per unit and further enhance the franchise owners value proposition, while expanding our international and platform businesses.
Scott Oaksmith: Our priority continues to be investing in our business to drive organic growth. We will continue to make targeted investments in our business to drive growth focused on hotels that generate higher royalties per unit and further enhance the franchise owner's value proposition, while expanding our international and platform business. Secondly, we remain committed to value-creating M&A, focusing on opportunities like Wyndham where we can both improve the profitability of the existing franchisees as well as grow the combined portfolio. Historically, our strong cash flow and ample debt capacity have been more than sufficient to allocate capital to both organic and inorganic growth, allowing us to return capital to shareholders through our dividend and share repurchase programs. Clearly, as demonstrated by our continued efforts and the confidence we have in our success.
Scott: We believe that we can drive the strong revenue growth in the years ahead as we continue to expand our platform and increase the number of products and services, we offer to over 7500 hotels millions of guests and other travel partners.
Secondly, we remain committed to value, creating M&A focusing on opportunities like Wyndham, where we can both improve the profitability of the existing franchisees as well as grow the combined portfolio.
Scott: I'd like now to turn to our well positioned low leveraged balance sheet marked by net debt to EBITDA of two nine times, which continues to be below the low end of our targeted range of three to four times.
Historically, our strong cash flow and ample debt capacity had been more than sufficient to allocate capital to both organic and inorganic growth.
Scott: In 2023, we generated operating cash flows totaling nearly $300 million.
Scott: We also further enhanced our balance sheet in the fourth quarter as we closed on a new $500 million term loan, which increased our liquidity to approximately $650 million as of year end.
Allowing us to return capital to shareholders through our dividend and share repurchase programs.
Clearly as demonstrated by our continued efforts and the confidence we have in our success.
The greatest opportunity to create value for all stakeholders is to realize the over $2 billion of.
Scott: We utilized our strong cash flows and under Levered balance sheet to continue to invest in the business generating impressive growth in our profitability as well as acquiring over $110 million of Wyndham common stock.
Of initial shareholder value creation present in a combination with Wyndham.
Should this not transpire, our current under Levered balance sheet and attractive growth trajectory, coupled with a significant discount to the intrinsic value of our stock provide a very attractive return opportunity through the repurchase of shares.
Scott: In 2023, we were also able to return over $422 million to shareholders, including nearly $57 million in cash dividends and $366 million in share repurchases.
Before opening it up for questions.
Scott Oaksmith: The greatest opportunity to create value for all stakeholders is to realize the over $2 billion of initial shareholder value creation present in a combination with Wendell. However, should this not transpire, our current under-leveraged balance sheet and attractive growth trajectory, coupled with a significant discount to the intrinsic value of our stock, provide a very attractive return opportunity through the repurchase. Before opening it up for questions, I'd like to turn to our expectations for what lies ahead. As we look into 2024, we expect to generate a Just a Diva Dot in the range of $580 million and $600 million. We anticipate this growth to be driven by incremental contributions from Radisson America, including the expected additional cost synergies of approximately two million dollars, as well as organic growth across more revenue-intense hotels. Robust, Effective Rural Rate Growth. Continued growth from our co-branded credit card, strong international business, and other factors. This outlook does not account for any additional M&A, repurchase of the company's stock, or other capital markets.
Like to turn to our expectations for what lies ahead.
Scott: We achieved all of this while remaining below our targeted leverage levels.
As we look into 2024, we expect to generate adjusted EBITDA in the range of $580 million and $600 million.
Scott: With our strong cash flow and ample debt capacity, we are committed to creating value for our shareholders by accretively investing to further expand our business and also effectively support the acquisition and successful integration of Wyndham.
We anticipate this growth to be driven by incremental contribution from Radisson Americas, including the expected additional cost synergies of approximately $2 million.
As well as organic growth across more revenue intense hotels and markets.
Scott: Our capital allocation priorities remain unchanged and we are well positioned to continue our long track record of delivering outsized value for our shareholders.
Robust effective royalty rate growth.
Continued growth from our co branded credit card strong international business and other factors.
Scott: Our priority continues to be investing in our business to drive organic growth.
This outlook does not account for any additional M&A repurchase of the companys stock or other capital markets activity.
Scott: We will continue to make targeted investments in our business to drive growth focused on hotels that generate higher royalties per unit and further enhance the franchise owners value proposition, while expanding our international and platform businesses.
We expect our full year 2024, adjusted diluted earnings per share to range between $6 30.
And $6 60 per share.
Underlying our outlook are the following assumptions for full year 2024, we expect.
Scott: Secondly, we remain committed to value, creating M&A focusing on opportunities like Wyndham, where we can both improve the profitability of the existing franchisees as well as grow the combined portfolio.
Domestic system year over year growth of the more revenue intense portfolio of brands to continue to accelerate and be approximately 2%.
Scott: Historically, our strong cash flow and ample debt capacity have been more than sufficient to allocate capital to both organic and inorganic growth.
We project, our domestic revpar to range between flat to 2% year over year and finally, we anticipate our full year 2024 effective royalty rate to grow in the mid single digits year over year.
Scott: Allowing us to return capital to shareholders through our dividend and share repurchase programs.
Today's results are a testament that our strategy is working and we intend to keep investing in those areas of our business that will generate the highest return on our capital.
Scott: Clearly as demonstrated by our continued efforts and the confidence we have in our success great.
Scott: Our greatest opportunity to create value for all stakeholders is to realize the over $2 billion.
At this time patent I would be happy to answer any questions operator.
Scott: Of initial shareholder value creation present in a combination with Wyndham.
Ladies and gentlemen, we will now begin the question and answer session should you have a question.
Scott: Should this not transpire, our current under Levered balance sheet and attractive growth trajectory, coupled with a significant discount to the intrinsic value of our stock provide a very attractive return opportunity through the repurchase of shares.
Press Star followed by the one on your Touchtone phone you will hear a three ton acknowledging a request in your questions will be posed in the Oregon. Today are received should you wish to decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift the handset before pressing any Keith one moment. Please for your first question.
Scott Oaksmith: We expect our full-year 2024 adjusted diluted earnings per share to range between $6.30 and $6.60 per share. Underlying our outlook are the following assumptions for full year 2020. We expect the domestic system year-over-year growth of the more revenue-intense portfolio brands to continue to accelerate and be approximately 2%. We project our domestic REB PAR to range between flat to 2% year-over-year. And finally, we anticipate our full year 2024 effective royalty rate to grow in the mid single digits. Today's results are a testament that our strategy is working, and we intend to keep investing in those areas of our business that will generate the highest return on our capital. At this time, Pat and I would be happy to answer any questions you may have. Operator.
Scott: Before opening it up for questions.
Speaker Change: Like to turn to our expectations for what lies ahead.
Speaker Change: As we look into 2024, we expect to generate adjusted EBITDA in the range of $580 million and $600 million.
Your first question comes from Shaun Kelly with Bank of America. Please go ahead.
Hi, good morning, everyone. Thanks for taking my questions.
Speaker Change: We anticipate this growth to be driven by incremental contribution from Radisson Americas, including the expected additional cost synergies of approximately $2 million.
If we could Pat.
And Scott if we could start with you.
Just just a little bit more around the Wyndham offer I guess, specifically at this point, where it seems like the terms.
Speaker Change: As well as organic growth across more revenue intense hotels and markets.
Speaker Change: Robust effective royalty rate growth.
That had been set out remained largely stable up until we probably reach.
Speaker Change: Continued growth from our co branded credit card strong international business and other factors.
More details around the proxy contest.
Speaker Change: This outlook does not account for any additional M&A repurchase of the company's stock.
Wondering could you for everybody.
Your point could you help us think a little bit more about any chance or opportunity to improve the economics of an offer from here and how will feedback work during the proxy process, what I mean by that is if.
Speaker Change: Other capital markets activities.
We expect our full year 2024, adjusted diluted earnings per share to range between $6 30.
Speaker Change: $6 60 per share.
When you start receiving feedback at some point that the offer is just not sufficient to get the votes that you might want to achieve can you adjust that offer during the proxy process or maybe how do the mechanics work around that are you free to do that at any point in time. Thank you.
Speaker Change: Underlying our outlook are the following assumptions for full year 2024.
Speaker Change: We expect the domestic system year over year growth of the more revenue intense portfolio of brands to continue to accelerate and be approximately 2%.
Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the number on your touch-tone phone.
Speaker Change: We project, our domestic revpar to range between flat to 2% year over year and.
Sure. Thanks, John I appreciate the question.
I think when you look at where we stand today. Unfortunately Windows Board really just continues to refuse to engage so to your first point about willingness to improve the offer. We've said this multiple time the door remains open to Wyndham to engage in a constructive private dialogue with us.
Speaker Change: And finally, we anticipate our full year 2024 effective royalty rate to grow in the mid single digits year over year.
Operator: You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift your hands up before pressing any key.
Speaker Change: Today's results are a testament that our strategy is working and we intend to keep investing in those areas of our business that will generate the highest return on our capital.
Speaker Change: At this time, Pat and I would be happy to answer any questions operator.
And we believe theres opportunity to improve our offer if bill engage with US that's the first thing and the second is <unk>.
Allow us to undertake some due diligence so those have always been the key factors here I think that are in play regarding your question on feedback I mean, the good news about what we did October 17th and we brought our proposal public and then on December <unk>. When we launched the exchange offer is it's given us an opportunity to speak directly with Wyndham.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question.
Operator: One moment, please, for your first question. Your first question comes from Shaun Kelley with Bank of America. Please go ahead. Hi. Good morning, everyone.
Speaker Change: Please press star followed by the one on your Touchtone Pollack, you will hear a three ton acknowledging your request and your questions will be pulled in the Orbitz. They are received should you wish to decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift the handset before pressing any Keith one moment. Please for your first question.
Shaun C. Kelley: Thanks for taking my questions. If we could, Pat, Dom, and Scott, if we could start with just a little bit more on the Wyndham offer. I guess specifically at this point, where it seems like the terms that have been set out remain largely stable up until we probably reach more details around the proxy contest. I'm just wondering, could you, for everybody's viewpoint, could you help us think a little bit more about any chance or opportunity to improve the economics of an offer from here? And how will feedback work during the proxy process? What I mean by that is, if you start receiving feedback at some point that the offer is just not sufficient to get the votes that you might want to achieve, can you adjust that offer during the proxy process? Or maybe even more importantly, how do the mechanics work around that?
<unk> shareholders now.
We've gotten great feedback from them around what they like about the offer.
Speaker Change: Your first question comes from Shaun Kelly with Bank of America. Please go ahead.
And where they might like to see an additional.
Improvement in the offer and I think the feedback we've heard from them is around one word. They are frustrated they are frustrated that windows board is not engaging in a conversation that would help answer those questions.
Shaun C. Kelley: Hi, good morning, everyone. Thanks for taking my questions.
Shaun C. Kelley: If we could Pat dominant Scott if we could start with.
Shaun C. Kelley: Just just a little bit more around the Wyndham offer I guess, specifically at this point, where it seems like the terms.
I think when you look at the proxy versus the exchange offer let's not forget about the fact that during the exchange offer that's been a blueprint for Wyndham shareholders to provide us with great feedback they have the opportunity to tender their shares.
Shaun C. Kelley: That had been set out remain largely stayed stable up until we probably reach.
Shaun C. Kelley: More details around the proxy contest.
Until the.
Shaun C. Kelley: Wondering could you for everybody's viewpoint could you help us think a little bit more about any chance or opportunity to improve the economics of an offer from here and how will feedback work during the proxy process, what I need why that is.
Exchange offer expires, which is currently five o'clock, New York City time on Friday March eight.
There's opportunity for the shareholders to continue to express there.
Shaun C. Kelley: Are you free to do that at any point in time? Thank you. Sure. Thanks, Shaun.
Interest with us around the transaction and also for us to hear feedback from them around how they view the offer that's on the table.
Patrick Pacious: I appreciate the question. You know, I think when you look at where we stand today, unfortunately, you know, Wyndham's board really just continues to refuse to engage. So to your first point about willingness to, you know, improve the offer, we've said this multiple times: the door remains open to Wyndham to engage in a constructive private dialogue with us. And we believe there's an opportunity to improve our offer if they engage with us. That's the first thing I want to say.
Shaun C. Kelley: If you start receiving feedback at some point that the offer is just not sufficient to get the votes that you might want to achieve.
And Sean the only thing I would just add if you think about the proxy process and what we've done has nominated a slate of directors and independent slate of directors.
Shaun C. Kelley: You adjust that offered during the proxy process or maybe how do the mechanics work around that are you free to do that at any point in time. Thank you.
We believe that would want to negotiate with us on the deal. So the deal can continue to change with a board that's willing to negotiate with us so voting for the slate of directors is really a vote for a board thats willing to engage in a dialogue to see if we can create value in this transaction.
Sure. Thanks, John I appreciate the question.
Speaker Change: When you look at where we stand today. Unfortunately Windows Board really just continues to refuse to engage so to your first point about willingness to improve the offer we said this multiple time the door remains open to Wyndham to engage in a constructive private dialogue with us.
Patrick Pacious: And the second is, allow us to undertake some due diligence. So those have always been the key factors here, I think, that are in play. You know, regarding your question on feedback, I mean, the good news about what we did on October 17th, when we brought our proposal public, and then on December 12th, when we launched the exchange offers, it gave us an opportunity to speak directly with Wyndham's shareholders. And we've gotten great feedback from them around what they like about the offer and where they might, you know, like to see an additional improvement in the offer. And I think the feedback we've heard from them is around one word: they're frustrated. They are frustrated that Wyndham's board is not engaging in a conversation that would help answer those questions.
Great. Thanks, and maybe just one on the business fundamentals, but obviously there was a lot in here about the.
Speaker Change: And we believe theres opportunity to improve our offer if they'll engage with us. That's the first thing and the second is allow us to undertake some due diligence. So those have always been the key factors here I think that are in play regarding your question on feedback I mean, the good news about what we did October 17th and we brought our proposal public.
The acceleration you saw in net unit growth and it seems like a decent amount of that hinges on some improvements in international.
Just wondering if you could talk about the sort of contract economics in some of these international deals and partnerships and what you've been able to add to the pipeline. There are these largely similar to your domestic.
<unk> franchise economics are these running or are these running through.
Speaker Change: And then on December 12th when we launched the exchange offer is it's given us an opportunity to speak directly with Wyndham shareholders.
Master partnerships, and someplace, where the economics, maybe a little bit different or a little bit inferior to what you see in the domestic business.
Speaker Change: We've gotten great feedback from them around what they like about the offer.
Yes, and it's a healthy mix Shawn as you know we have.
Speaker Change: And where they might like to see an additional.
In some markets, we do direct franchising, we do that in markets, where the regulatory environment is favorable for franchising, where small business people can.
Improvement in the offer and I think the feedback we've heard from them is around one word. They are frustrated they are frustrated that Wyndham has board has not engaging in a conversation that would help answer those questions.
Patrick Pacious: You know, I think when you look at the proxy versus the exchange offer, let's not forget about the fact that during the exchange offer, that's been a blueprint for Wyndham shareholders to provide us with great feedback. They have the opportunity to tender their shares up until the exchange offer expires, which is currently 5 o'clock New York City time on Friday, March 8th.
Aggregate capital and make investments and so that's where those are markets, where direct franchising works and we've seen we've seen growth.
Speaker Change: I think when you look at the proxy versus the exchange offer let's not forget about the fact that during the exchange offer that's been a blueprint for Wyndham shareholders to provide us with great feedback they have the opportunity to tender their shares.
Starting to pick up in those markets and then we've also when you look at the economics of the Master franchise agreements those are usually a little bit different to your point.
And if you look at what we did with the extension of our agreement with our partner in Scandinavia, Spain.
Speaker Change: Up until the.
Speaker Change: The exchange offer expires, which is currently five o'clock, New York City time on Friday March eight.
In particular, those are more of a sort of master franchise as opposed to direct franchising businesses. So the economics are a little bit different but we're really excited about the growth, we're seeing particularly in those direct franchise markets in the Americas and in Australia.
Patrick Pacious: So there's an opportunity for shareholders to continue to express their interest in the transaction and also for us to hear feedback from them around how they view the offer that's on the table. Shaun, the only thing I'd just add is, if you think about the proxy process, what we've done is nominate a slate of directors, an independent slate of directors that we believe would want to negotiate with us on the deal. So the deal can continue to change with a board that's willing to negotiate with us. So voting for the slate of directors is really a vote for a board that's willing to engage in a dialogue to see if we can create value in this transaction. Great, thanks.
Speaker Change: So there is opportunity for the shareholders to continue to express there.
Speaker Change: Interest with us around the transaction and also for us to hear feedback from them around how they view the offer that's on the table.
Yes, I think John just add to that the ones. We mentioned in our scripted remarks, our growth in France, and Spain are all direct market. So more similar economics to what we have in the U S than a master partner.
Speaker Change: And Sean the only thing I'd just add if you think about the proxy process and what we've done has nominated a slate of directors and independent slate of directors that we believed that would want to negotiate with us on the deal. So the deal could continue to change with a board that's willing to negotiate with us so voting for the slate of directors is really a vote for a board that's willing to engage.
Thank you Bob.
Okay.
Your next question comes from Michael Bellisario with Baird. Please go ahead.
Speaker Change: And a dialogue to see if we can create value in this transaction.
Thanks, Good morning, everyone.
You mentioned continued progress on the regulatory front and can you be more specific there I mean, what progress has been made.
Patrick Pacious: And maybe just one on the business fundamentals, but obviously, there was a lot here about the acceleration you saw in net unit growth, and it seems like a decent amount of that hinges on some improvements in international. Just wondering if you could talk about the sort of contract economics in some of these international deals and partnerships and what you've been able to add to the pipeline there. Are these largely similar to your domestic franchise economics, or are these running through master partnerships somewhere where the economics may be a little bit different or a little bit inferior to what you see in the domestic business?
Speaker Change: Great. Thanks, and maybe just one on the business fundamentals, but obviously there was a lot in here about.
Have you finalized your initial submission yet to the FTC and if you haven't what's the estimated timing there.
Sean: The acceleration you saw in net unit growth and it seems like a decent amount of that hinges on some improvements in international.
Yeah. Thanks, Michael I think when you look at where we are today. The second request began about six weeks ago. So we are well into that process.
Sean: Wondering if you could talk about the sort of contract economics in some of these international deals and partnerships and what you've been able to add to the pipeline. There are these largely similar to your domestic.
As we've stated before that our second request is not uncommon and we're continuing to work very constructively and cooperatively with the FTC on it we're making a lot of progress on that front, we don't see any surprises.
Sean: Franchise economics are these running or are these running through.
Sean: Master partnerships, and someplace, where the economics, maybe a little bit different or a little bit inferior to what you see in the domestic business.
And as we said before we remain confident in our ability to complete this.
Patrick Pacious: Yeah, and it's a healthy mix, Shaun. As you know, we have, in some markets, we do direct franchising; we do that in markets where the regulatory environment is favorable for franchising, where small business people can aggregate capital and make investments. And so that's where those are the markets where direct franchising works. And we've seen growth starting to pick up in those markets. And then we also when you look at the economics of the master franchise agreements, those are usually a little bit different to your point. And if you look at what we did with the extension of our agreement with our partner in Scandinavia, Spain, in particular, those are more of a sort of master franchise, as opposed to direct franchising businesses.
Speaker Change: Yes, and it's a healthy mix Shawn as you know we have.
This process as part of the transaction in that customary timeframe.
Speaker Change: In some markets, we do direct franchising, we do that in markets, where the regulatory environment is favorable for franchising, where small business people can.
And then just one follow up.
Any examples that you could provide.
Things, Dave asked for or the types of questions and comments that.
Speaker Change: Aggregate capital and make investments and so that's where those are markets, where direct franchising works and we've seen we've seen growth.
Theyre looking for answers.
Yes, I mean, they start with what's call sort of a broad request for information and then as the process moves forward they'll narrow it down into areas that they want to understand greater.
Starting to pick up in those markets and then we've also when you look at the economics of the Master franchise agreements those are usually a little bit different to your point.
Speaker Change: And if you look at what we did with the extension of our agreement with our partner in Scandinavia, Spain.
But as we've said before I think part of what they're learning.
Speaker Change: In particular, those are more of a sort of master franchise as opposed to direct franchising businesses. So the economics are a little bit different but we're really excited about the growth, we're seeing particularly in those direct franchise markets in the Americas and in Australia.
Is very.
In my view supportive of a transaction. The first is that this is a very competitive marketplace the lodging industry.
Patrick Pacious: So the economics are a little bit different, but we're really excited about the growth we're seeing, particularly in those direct franchise markets in the Americas and in Australia. Yeah, I think Josh said that the ones we mentioned in our scripted remarks, growth in France and Spain, are all direct markets. So more similar to the economics that we have in the US than a master. Thank you both. Your next question comes from Michael Bellisario with Baird. Please go ahead. Thanks, good morning everyone.
As a as a makeup of independent hotels online travel agencies, a lot of large well capitalized competitors. So they are looking at that second theyre looking at pricing and as we said before Wyndham and choice do not set price our franchisees do and that is a very healthy factor with regard to regulatory.
Speaker Change: Yes, I think George to add to that the ones. We mentioned in our scripted remarks, our growth in France, and Spain are all direct market. So more similar economics to what we have in the U S than a master partner.
Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Your next question comes from Michael Bellisario with Baird. Please go ahead.
Lori issues.
They are looking into how.
The Otas play in this industry.
Michael Bellisario: Thanks, Good morning, everyone.
And as we've said before one of the compelling reasons for putting our two companies together is to drive down the cost of running a hotel and ultimately reliance on expensive third party distributors. So they are learning about some of the.
Michael Bellisario: You mentioned continued progress on the regulatory front. Can you be more specific? I mean, what progress has been made? Have you finalized your initial submission yet to the FTC? And if you haven't, what's the estimated timing there?
Michael Bellisario: You mentioned continued progress on the regulatory front and can you be more specific there I mean, what what progress has been made have you finalized your initial submission yet to the FTC and if you haven't what's the estimated timing there.
Specifics of the industry, how pricing works for the consumer.
Patrick Pacious: Yeah, thanks, Michael. You know, I think when you look at where we are today, the second request began about six weeks ago. So we are well into that process. You know, as we've stated before, that a second request is not uncommon.
Speaker Change: Yeah. Thanks, Michael I think when you look at where we are today. The second request began about six weeks ago. So we are well into that process.
And ultimately really competitive nature.
Of the spaces, where we compete.
Speaker Change: As we've stated before that our second request is not uncommon and we're continuing to work very constructively and cooperatively with the FTC on it we're making a lot of progress on that front, we don't see any surprises.
And they also not just looking at status quo there.
Patrick Pacious: And we're continuing to work very constructively and cooperatively with the FTC on it. We're making a lot of progress on that front; we don't see any surprises. And as we've said before, we remain confident in our ability to complete this process as part of the transaction in that customary time. And then, just one follow-up, maybe any examples that you could provide of things they've asked for or the types of questions and comments that they're looking for answers on. Yeah, I mean, they start with what's called, you know, sort of a broad request for information.
Looking at a lot of what our competition is doing and how the competitive landscape is evolving so a lot of the questions they're asking are around.
Speaker Change: And as we said before we remain confident in our ability to complete this.
New brand launches from really well capitalized competitors in the segments, where we currently compete today. So it's a it's abroad.
Speaker Change: This process as part of the transaction in that customary timeframe.
Speaker Change: And then just one follow up there maybe any examples that you could provide of.
Effort at the beginning and as they move through that discovery process, we would expect.
Speaker Change: Things, Dave asked for or the types of questions and comments that.
Those questions will narrow down.
But we're six weeks in it's it's probably at the sort of peak of the <unk>.
Speaker Change: They are looking for answers on.
Speaker Change: Yes, I mean, they start with what's call sort of a broad request for information and then as the process moves forward they'll narrow it down into areas that they want to understand greater.
Level of effort.
And as we get closer to being substantially compliant with the second request, we would expect that the FTC and choice of when it would be narrowing list of issues to be.
Patrick Pacious: And then as the process moves forward, they'll narrow it down into areas that they want to understand more. But as we've said before, you know, I think part of what they're learning is very, in my view, supportive of a transaction. The first is that this is a very competitive marketplace; the lodging industry is composed of independent hotels, online travel agencies, a lot of large, well-capitalized competitors.
Speaker Change: But as we said before I think part of what they're learning.
Dealt with.
Speaker Change: Is very.
Got it thanks for that detail.
Speaker Change: In my view supportive of a transaction. The first is that this is a very competitive marketplace the lodging industry.
One more from me just on the fundamentals of flat to 2% Revpar growth outlook. How are you thinking about the quarterly cadence in 'twenty, four and when might the year over year growth rate flip from negative to positive.
Speaker Change: As a as a makeup of independent hotels online travel agencies, a lot of large well capitalized competitors. So they're looking at that second theyre looking at pricing and as we said before Wyndham and choice do not set price our franchisees do and that is a very healthy factor with regard to to regulatory.
Yeah. Thanks, Michael in terms of Revpar, we still think the long term fundamentals for travel remains strong. So we look at a macro basis supply growth is still expected to be relatively muted in the industry growing less than 1%, but GDP consumer spending both both expected to grow over 2% in 2024, and an unemployment still remains at.
Patrick Pacious: So they're looking at that. Second, they're looking at pricing. And as we said before, Wyndham and Choice do not set prices; our franchisees do.
Patrick Pacious: And that is a very healthy factor with regard to regulatory issues. You know, they're looking into how, you know, the OTAs play in this industry. And as we've said before, one of the compelling reasons for putting our two companies together is to drive down the cost of running a hotel and ultimately reliance on expensive third-party distributors.
Speaker Change: Tori issues.
Speaker Change: They are looking into how the otas play in this industry.
Oracle lows so.
Speaker Change: And as we said before one of the compelling reasons for putting Archer. Our two companies together is to drive down the cost of running a hotel and ultimately reliance on expensive third party distributors. So they are learning about some of the.
We're feeling confident Americans are still prioritizing their travel budgets with with 80% of Americans planning to travel this year than most expected to increase the amount they're spending on travel.
We think the business has quite a bit of room to grow we are still below in terms of occupancy our pre pandemic levels. So.
Patrick Pacious: So they're learning about some of the specifics of the industry, how pricing works for the consumer, and ultimately, the really competitive nature of the spaces where we compete. And they are also not just looking at the status quo. They're looking at a lot of what our competition is doing and how the competitive landscape is evolving. So a lot of the questions they're asking are around new brand launches from really well-capitalized competitors in the segments where we currently compete today. So it's a broad effort at the beginning. And as they move through that discovery process, we would expect, you know, those questions will narrow down. But, you know, we're six weeks in, and it's probably, you know, at the sort of peak of the level of effort. And as we get closer to being substantially compliant with the second request, we would expect that the FTC, Choice, and Wyndham would be narrowing the list of issues to be dealt with. Thanks for that detail.
Speaker Change: Specifics of the industry, how pricing works for the consumer.
We believe is the first quarter will be again against some tougher comps, but we should start to see positive revpar growth.
Speaker Change: And ultimately really competitive nature of the <unk>.
The middle of the second quarter, and then growing to that zero to 2% we guided to.
Speaker Change: Spaces, where we compete.
Speaker Change: And they also not just looking at status quo.
Speaker Change: They're looking at a lot of what our competition is doing and how the competitive landscape is evolving so a lot of the questions. They're asking are around <unk>.
Perfect. Thank you. Your next question comes.
Okay.
Your next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Speaker Change: New brand launches from really well capitalized competitors.
Hey, Thanks, maybe.
Speaker Change: In the segments, where we currently compete today so it's a it's abroad.
Two follow ups on the FTC question, how would you think about remedies if it does go down that path.
Speaker Change: Effort at the beginning and as they move through that discovery process, we would expect.
And then what's the willingness or thought process on <unk>.
Speaker Change: Those questions will narrow down.
The litigating if.
Speaker Change: But we're six weeks in it's it's probably at the sort of the peak of the level of effort.
The FTC doesn't see things your way.
Well I think Steven it's important to just start off with our view of the regulatory environment. It's based in fact and legal precedent.
Speaker Change: And as we get closer to being substantially compliant with the second request, we would expect that the FTC and choice of when it would be narrowing list of issues to be.
And so when we look at what the conversations with the FTC might be I don't want to speculate on where that might go.
Speaker Change: <unk>.
As we've said publicly we are willing to make any changes that arent materially having an impact on the transaction.
Speaker Change: Got it thanks for that detail and then just one more for me just on the fundamentals of flat to 2% Revpar growth outlook. How are you thinking about the quarterly cadence in 'twenty, four and when might be year over year growth rate flip from negative to positive.
Patrick Pacious: And there's just one more for me, just on the fundamentals, the flat, 2% REVPAR growth outlook. How are you thinking about the quarterly cadence in 2024? And when might the year-over-year growth rate flip from negative to positive? Thanks. Thanks, Michael.
But what we've stated before and what we're seeing currently.
Those are not things that we are.
<unk> focus on today, and then as I said I'm not going to speculate on where things might go.
Speaker Change: Yeah. Thanks, Michael in terms of Revpar, we still think the long term fundamentals for travel remains strong. So we look at a macro basis supply growth is still expected to be relatively muted in the industry growing less than 1%, but GDP consumer spending both are both expected to grow over 2% in 2024, and an unemployment still remains at.
Scott Oaksmith: In terms of REBPAR, you know, we still think the long-term fundamentals for travel remain strong. So, on a macro basis, supply growth is still expected to be relatively muted in the industry, growing less than 1%. But GDP, and consumer spending are both expected to grow over 2% in 2024. And unemployment still remains at historical lows.
But we feel really confident as I said about how we view the.
Latoya environment. If you look at the presentation, we put out on January the 10th I think youll see there that it's based as I said in legal fact in precedent around how the antitrust environment should be viewed in this combination the facts, where every case are different.
Scott Oaksmith: So, you know, we're feeling confident Americans are still prioritizing their travel budgets with 80% of Americans planning to travel this year and most expecting to increase the amount they're spending on travel. So, you know, we think the business has quite a bit of room to grow. We're still below, in terms of occupancy, our pre-pandemic levels.
Speaker Change: Brickell lows so.
Speaker Change: We're feeling confident Americans are still prioritizing their travel budgets with with 80% of Americans planning to travel this year than most expected to increase the amount they're spending on travel. So we think the business has quite a bit of room to grow we're still below in terms of occupancy our pre pandemic levels, so where.
And we feel really confident in our view of how things will progress on that front.
Great and then maybe on fundamentals can you just help us tie out.
The lower EPS growth versus EBITDA growth and perhaps even loop.
Scott Oaksmith: So, you know, where we believe is, you know, the first quarter will again have tougher comps, but we should start to see positive REBPAR growth in kind of the middle of the second quarter and then grow to that 0% to 2% we guided. Perfect, thank you. Your next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Speaker Change: Where we believe is the first quarter will be again against some tougher comps, but we should start to see positive revpar growth.
<unk> in your expectations for free cash flow conversion and the puts and takes there in 2024 and perhaps longer term.
The middle of the second quarter, and then growing to that took that zero to 2% we guided to.
Yes, really the difference between the EBITDA growth and seniors.
You are referring to Q4 versus the guidance.
Speaker Change: Perfect. Thank you. Your next question comes.
I'm referencing your 2024 outlook, but I just look at 10% roughly in the midpoint EBITDA growth, but low single digit EPS growth.
Speaker Change: Your next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen White Grambling: Hey, thanks. Maybe two follow-ups on the FTC questions. What how would you think about remedies if it does go down that path?
Really the difference there is really interest expense and a slightly higher tax rate. So.
Stephen White Grambling: Hey, Thanks, maybe.
Stephen White Grambling: Two follow ups on the FTC questions. How would you think about remedies if it does go down that path.
Our debt is up about $300 million year over year kind of on average about half of that the combination of higher rates.
Patrick Pacious: And then what's the willingness or thought process of litigating if the FTC doesn't see things your way? Well, I think Stephen, it's important to just start off with our view of the regulatory environment. It's based on fact and legal precedent. And so, you know, we look at what the conversations with the FTC might be; I don't want to speculate on where that might go. As we've said publicly, you know, we are willing to make any changes that aren't materially having an impact on the transaction. But you know, what we've stated before, what we're seeing currently, those are not things that we are focused on today. And as I said, I'm not going to speculate on where things might go. But we feel really confident, as I said, about how we view the regulatory environment. If you look at the presentation we put out on January 10th, I think you'll see there that it's based, as I said, on legal fact and precedent around how the antitrust environment should be viewed in this combination. The facts for every case are different.
And then what's the willingness or thought process on it.
We incurred during 2023 and a slightly higher debt level as we get back to our targeted leverage levels and then our tax rate is 24, 5%. We had a few discrete items some reversals of reserves in the fourth quarter that lowered our tax rate in 2023 that we don't expect to incur in 2024.
Speaker Change: Litigating if.
Speaker Change: The FTC doesn't see things your way.
Well I think Steven it's important to just start off with our view of the regulatory environment. It's based in fact and legal precedent.
Speaker Change: And so we look at what the.
Speaker Change: Issues with the FTC might be I don't want to speculate on where that might go.
And then from a free cash flow standpoint, I mean are there any big puts and takes to think through whether it's key money, that's going to be coming to fruition.
Speaker Change: As we've said publicly we are willing to make any changes that arent materially having an impact on the transaction.
There was also some affiliate investments things like that.
Speaker Change: But what we've stated before and what we're seeing currently.
Yes in terms of the way, we define free cash flow, we expect free cash flow to be similar to 2023, our key money should be generally in the same range that we spent in 2023, so a slight increase in key money, but our free cash flow conversion should be consistent between 23 and 2024.
Speaker Change: Those are not things that we are at.
Speaker Change: Focused on today, and then as I said I'm not going to speculate on where things might go but we feel really confident as I said about how we view the regulatory environment. If you look at the presentation. We put out on January the 10th I think youll see there that it's based as I said in legal fact in precedent around how the antitrust.
Great. Thank you so much.
Your next question comes from Robin Farley with UBS. Please go ahead.
Speaker Change: <unk> should be viewed in this combination the facts, where every case are different.
Great. Thanks, I wanted to just get a clarification. Your global pipeline. You mentioned was up 6% sequentially can you tell us what that was year over year. We just the numbers not in the 22 press release last year. So just to calculate the year over year change in global pipeline and then.
Stephen White Grambling: And we feel really confident in our view of how things will progress on that. Great, and maybe on fundamentals, can you just help us tie out the lower EPS growth versus EBITDA growth and perhaps even, loop in your expectations for free cash flow conversion and the puts and takes there in 2024 and perhaps longer term. Yes, really the difference between the EBITDA growth and, I assume you're referring to Q4 versus the guidance. I'm referencing your 2024 outlook, so I just look at 10% roughly in the mid-point, even die growth, but low single-digit EPS growth. Yeah, really. The difference there is really interest expense and a slightly higher tax rate.
Speaker Change: And we feel really confident in our view of how things will progress on that front.
Speaker Change: Great and maybe on fundamentals can you just help us tie out.
Speaker Change: The lower EPS growth versus EBITDA growth and perhaps even look.
Looking at your <unk>.
Speaker Change: Loop in your expectations for free cash flow conversion and the puts and takes there in 2024 and perhaps longer term.
The revenue intense segments that that grouping.
Upscaling.
Speaker Change: Yes, Steve it really that the difference between the EBITDA growth and I assume youre, referring to Q4 versus the guidance.
And mid scale.
It looks like sequentially or there wasn't really an increase in.
And those sequentially not a lot of rooms, they're opening in Q4 was that just something specific just for that quarter or just something seasonal to keep in mind or maybe just something one time in Q4. Thanks.
Speaker Change: I'm referencing your 2024 outlook, if I just look at 10% roughly in the midpoint EBITDA growth, but low single digit EPS growth.
Speaker Change: So really the difference there is really interest expense and a slightly higher tax rate. So our.
So robin you cut out a little bit your second part of the question and your first part I'll answer the first part maybe you could repeat the second part in terms of the global pipeline our global pipeline.
Scott Oaksmith: So our debt is up about $300 million year-over-year, kind of on average, about half of that. A combination of higher rates that we incurred during 2023 and a slightly higher debt level as we get back to our targeted leverage levels, and then our tax rate is at 24.5%. We had a few discrete items, some reversals of reserves in the fourth quarter that lowered our tax rate in 2023 that we don't expect to incur in 2024. And then from a free cash flow standpoint, I mean, are there any big puts and takes to think through whether it's key money that's going to be coming to fruition? Or I think there were also some affiliate investments, things like that.
Speaker Change: Our debt is up about $300 million a year over year kind of on average about half of that a combination of higher rates.
At the end of the year I was basically flat.
Speaker Change: We incurred during 2023 and a slightly higher debt level as we get back to our targeted leverage levels and then our tax rate is at 24, 5%. We had a few discrete items some reversals of reserves in the fourth quarter that lowered our tax rate in 2023 that we don't expect to incur in 2024.
About 106000 rooms down to 105000 rooms, and really that was a reflection of really strong openings that we had during the year and I think we've talked about this on the last quarterly call, but we did have a clean up of some of our pipeline in early Q1 of 2023, where we have taken a look at it some contracts where because coming out of the pandemic. We didn't think we're going to open in a new <unk>.
Speaker Change: And then from a free cash flow standpoint, I mean are there any big puts and takes to think through whether it's key money that's going to be coming to fruition or I think there was also some affiliate investments things like that.
Struction pipeline, knowing that it was a strong conversion environment, where we could fill those markets with with existing hotels, we made the onetime decision to terminate some hotels, knowing that we could sell into those markets and quickly realize those revenue streams. So we can focus on the sequential quarter over quarter growth, which we talked about was up 6% on a global basis.
Scott Oaksmith: In terms of the way we define free cash flow, we expect free cash flow to be similar to 2023. Our key money should be generally in the same range that we spent in 2023. So a slight increase in key money, but our free cash flow conversion should be consistent between 2023 and 2024. Great, thank you so much.
Speaker Change: Yes in terms of the way, we define free cash flow and we can we expect free cash flow to be similar to 2023, our key money should be generally in the same range that we spent in 2023, so a slight increase in key money, but our free cash flow conversion should be consistent between 2023 and 2024.
You made a comment about Q4, but unfortunately, the audio cut out a little bit. So could you repeat that question sure. Yes, Q4 was just.
Speaker Change: Great. Thank you so much.
Your commentary about what you call the revenue intense segments.
Robin M. Farley: Your next question comes from Robin Harley with UBS. Please go ahead. Um, great. Thanks.
I would say in.
Speaker Change: Your next question comes from Robin Farley with UBS. Please go ahead.
Our feeling that scale.
It looked like openings in Q4 were sort of.
Robin M. Farley: Great. Thanks, I wanted to just get a clarification. Your global pipeline. You mentioned was up 6% sequentially can you tell us what that was year over year. We just the numbers not in the 22 press release last year. So just to calculate the year over year change in global pipeline and then also looking at your.
Scott Oaksmith: I wanted to get a clarification on your global pipeline...?? The Bulletproof Executive 2013 to press release last year. It looked like sequentially, or there wasn't really any..., those sequentially. Was that just?
There weren't really openings and sequentially in Q4 from Q3, and those groupings and I'm just wondering if that was seasonal or something just specific to Q4.
Just kind of what's behind that thanks.
It actually Q4 is typically our largest openings quarter quarter over quarter. So when you look at our September 30th results into.
Robin M. Farley: What you call the <unk>.
Robin M. Farley: Revenue intense segments that that grouping of them.
Robin M. Farley: Upscale and.
Robin M. Farley: Extended stay in mid scale, it looks like sequentially or there wasn't really an increase.
Into the <unk>.
Remember 31, we actually saw strong growth in all of our revenue intensive brands.
Robin M. Farley: In those sequentially not a lot of Brinci you're opening in Q4 was that just something specific just for that quarter or just something seasonal to keep in mind or maybe just.
The comfort brand with spring brand all of our extended stay brands at quarter over quarter growth. So happy to take offline with what you are looking at but we saw a strong opening growth.
Scott Oaksmith: Just to that quarter. Robin, you cut out a little bit in your second part of the question, and in your first part. I'll answer the first part; maybe you could repeat the second part. In terms of the global pipeline, our global pipeline from the end of the year was basically flat, just about 106,000 rooms down to 105,000 rooms. And really, that was a reflection of the strong openings that we had during the year. And I think we talked about this on the last quarterly call, but we did have a cleanup of some of our pipeline in early Q1 of 2023, where we had taken a look at some contracts where, because coming out of We made the one-time decision to terminate some hotels, knowing that we could sell into those markets and quickly realize those revenue streams.
Full year growth of 13% and our openings.
Robin M. Farley: They were one time in Q4.
Speaker Change: Okay, Robyn you cut out a little bit your second part of the question and your first part I'll answer the first part maybe you could repeat the second part in terms of the global pipeline, our global pipeline from the end of the year I was basically flat.
Okay, and Robyn I see about 100 for Q4 openings that was a 4% increase year over year.
Scott said, we can take it offline. Okay I was just sequential okay. Thanks.
Speaker Change: About 106000 rooms down to 105000 rooms, and really that was a reflection of really the strong openings that we had during the year and I think we talked about this on the last quarterly call, but we did have a cleanup of some of our pipeline in early Q1 of 2023, where we have taken a look at it some contracts where they're just coming out of the pandemic. We didn't think we're going to opening our new <unk>.
Your next question comes from Joe Greff with Jpmorgan. Please go ahead.
Good morning, everybody.
Royalty fees grew just under 9% year over year, and 2023 actually royalty licensing and management fees.
That $513 million level.
Instruction pipeline, knowing that it was a strong conversion environment, where we could fill those markets with with the existing hotels. We made a one time decision to terminate some hotel was knowing that we could sell into those markets and quickly realize those revenue streams. So we've been focused on the sequential quarter over quarter growth, which we talked about was up 6% on a global basis.
Reverse engineer your 2024 outlook I'm getting to something Thats, an accelerating level of growth in that line item is that how you're.
Looking at things based on some of the drivers that you've given some of the drivers that maybe are underlying that overall assumption for EBITDA growth.
Scott Oaksmith: We've been focused on the sequential quarter-over-quarter growth, which we talked about was up 6% on a global basis. You made a comment about Q4, but unfortunately, the audio cut out a little bit, so could you repeat that question? Sure, yeah, the Q4 was just your commentary about what you call the revenue intent segments, the extended stay. It looked like openings in Q4 were sort of, that there weren't really openings sequentially in Q4 from Q3 in those groupings, and I'm just wondering if that was seasonal or something just specific to Q4.
You made a comment about Q4, but unfortunately, the audio cut out a little bit. So could you repeat that question sure. Yes, Q4 was just.
Yes, if you take a look at our drivers this year. So our revpar was that increase for the full year of 0.1% our revenue intensive unit growth was about one 8% and we grew our effective royalty rate in the mid single digits. So we are expecting a slight acceleration of that with revpar increasing 1%.
Speaker Change: Your commentary about what you call the revenue intense segments.
Speaker Change: Jay and appealing mid scale.
Speaker Change: It looked like openings in Q4 were sort of.
Our revenue intensive net unit growth being at approximately 2%.
Speaker Change: There weren't really openings sequentially in Q4 from Q3, and those groupings and I'm just wondering if that was seasonal or something just specific to Q4.
And the royalty rate should be effectively flat year over year as far as the terms of growth, but up mid single digits again. So there is some acceleration in that we also there is a small portion of our corporate credit card thats in there and the licensing fees that will be driving a piece of that number as we continue to realize the benefits from the <unk>.
Speaker Change: Just kind of what's behind that thanks.
Scott Oaksmith: And actually, Q4 is typically our largest openings quarter, quarter over quarter. So when you look at our September 30th results into, into December 31st, we actually, you know, saw strong growth and all of our revenue-intensive brands, you know, the Comfort brand, WoodSpring brand, all of our extended stay brands had quarter over quarter growth. So happy to take offline with what you're looking at.
Speaker Change: It actually Q4 is typically our largest openings quarter quarter over quarter. So when you look at our September 30th results into <unk>.
Co branded credit card with Wells Fargo, and then lastly, strong international growth continued in that number should make that number grow a little bit Bob.
Speaker Change: Into the.
Speaker Change: December 31, we actually saw strong growth in all of our revenue intensive brands.
Speaker Change: Comfort brand with spring brand all of our extended stay brands at quarter over quarter growth. So happy to take offline with which you are looking at but we saw strong opening growth, including a full year growth of 13% and our openings.
A faster pace than it did in 2023.
Got it so that 9% growth rate in royalties and other fees should grow at a festival that 2020, just making sure I'm hearing you correctly.
Scott Oaksmith: But we saw strong opening growth, including a full year growth of 13% in our openings. Yeah, Robin, I see about 104 Q4 openings. That was a 4% increase year over year. So, That's it. We can take it offline.
Speaker Change: Okay, Robyn I see about 100 for Q4 openings that was a 4%.
The overall percentages may not be there you have some a little bit of in the 2023 that royalty rate that royalty number percentage was against the Radisson acquisition that when we had little over Q4 and it was a partial Q3.
Robyn: Increase year over year so.
Robyn: Scott said, we can take it offline.
Joseph R. Greff: I was just looking at a quick question. Your next question comes from Joe Greff with J.P. Morgan. Please go ahead. Good morning, everybody.
Robyn: Okay.
Robyn: Okay. Thanks.
Robyn: Your next question comes from Joe Greff with Jpmorgan. Please go ahead.
But if you look at the fundamentals as kind of a year over year of our pipe of R. R.
For our portfolio.
Joseph R. Greff: Good morning, everybody.
The unit growth the Revpar and the effective royalty rate also grow at a faster pace that 9% is again 2023 compared to 2022, when we acquired Radisson in August of 2022, so that number should be would have been higher in 2023, then it will be in 2024.
Joseph R. Greff: Your royalty fees grew just under 9% year-over-year in 2023, actually, royalty licensing and management fees, that $513 million level. If I reverse engineer your 2024 outlook, I'm getting to something that's an accelerating level of growth in that line item. Is that how you feel?
Joseph R. Greff: <unk> royalty Steve's grew just under 9% year over year, and 2023 actually royalty license from the management fees.
Joseph R. Greff: The $513 million level, if I reverse engineer your 2024 outlook I'm getting to something thats, an accelerating level of growth in that line item is that how you are.
Got it and just a.
Scott Oaksmith: looking at things based on some of the drivers that you've given and some of the drivers that maybe are underlying that overall assumption for Evadagro. Yeah, if you take a look at our drivers this year, our REBPAR was at an increase for the full year of 0.1%. Our revenue-intensive unit growth was about 1.8%, and we grew our effective royalty rate in the mid-single digits. So we are expecting a slight acceleration of that, with REBPAR increasing 1%, and our revenue-intensive net unit growth being at approximately 2%. And the royalty rate should be effectively about flat year-over-year as far as terms of growth are concerned, but up mid-single digits again. So there is some acceleration in that.
A couple of questions.
Joseph R. Greff: Looking at things based on some of the drivers that you've given some of the drivers that maybe are underlying that overall assumption for EBITDA growth.
On the Wyndham proposal I think it was Pat earlier in your prepared remarks, you referenced.
We have confidence in a deal that could close in a customary timeframe.
Speaker Change: Yes, if you take a look at our drivers this year. So our revpar was that increase.
Speaker Change: The increase for the full year of 0.1% our revenue intensive unit growth was about one 8% and we.
Can you talk a little bit more flesh.
Question on the bone on that comment and is that.
Thinking differently today versus a few months ago after having additional interactions with.
Speaker Change: We grew our effective royalty rate in the mid single digits. So we are expecting a slight acceleration of that with revpar, increasing 1% our revenue intensive net unit growth being at approximately 2%.
Regulatory.
Yes, sure Joe in fact.
We're three months from from from all of that so, yes, we're getting actually closer.
Speaker Change: The royalty rate should be effectively flat year over year as far as the terms of growth, but up mid single digits again. So there is some acceleration in that we also there is a small portion of our corporate credit card. That's in there and the licensing fees that will be driving a piece of that number as we continue to realize the benefits from the.
To it.
When we say the customary timeframe, we have been saying 12 months.
Scott Oaksmith: We also, there is a small portion of our corporate credit card that's in the licensing fees that will be driving a piece of that number as we continue to realize the benefits of the co-branded credit card with Wells Fargo. And then lastly, strong international growth continued in that number, should make that number grow a little bit faster than it did in 2023. Got it.
But as I said now we're six weeks into the second request on the regulatory front.
And that's going to be the long pole in the tent.
And Thats.
Speaker Change: Co branded credit card with Wells Fargo, and then lastly, strong international growth continued in that number should make that number grow a little bit Bob.
When we look at it from a second request to to a final outcome. We've been told to expect anything from six to nine months. So as we're six weeks into that six to nine month timeframe.
Speaker Change: At a faster pace than it did in 2023.
That is getting closer.
Joseph R. Greff: So that 9% growth rate in royalties and other fees should grow at a faster rate than in 2024. I'm just making sure I'm hearing you correctly. The overall percentages may not be there; we have some a little bit of a little bit of in 2023, you know, that royalty rate, that royalty number percentage was against a Radisson acquisition that only had a little over Q4 and a little partial Q3. But if you look at the fundamentals, it's kind of the year over year growth of our pipeline, our portfolio, you know, the unit growth, the REB PAR, and That 9% is, you know, again, 2023 compared to 2022 when we acquired Radisson in August of 2022. So that number should have been higher in 2023 than it will be in 2023. I got it.
Speaker Change: Got it so that 9% growth rate in royalties and other fees should grow at a tactical but 2024. It is just making sure I'm hearing you correctly.
And that's actually the thing when we talked to Wyndham shareholders.
I just want to understand not just around the regulatory environment itself, but also the timeframe involved in it.
Speaker Change: The overall percentages may not be there you have some a little bit of in the 2023 that royalty rate that royalty number percentage was against the Radisson acquisition that when we had a little over Q4 and I look partial Q3.
It's the reason or one of the reasons, we put the exchange offer in place was to get the regulatory process moving which we did in early December. So here. We sit late February we're getting closer to having some clarity for shareholders around that regulatory question and more importantly, the timing of it.
Speaker Change: But if you look at the fundamentals as kind of a year over year of our pipe of our.
Speaker Change: Our our portfolio.
So that's what we've been told to sort of expect from just the precedent and sort of how long these processes take but if you're looking at that six to nine months timeframe from January 12th when the second request began we're moving pretty rapidly down that path.
Speaker Change: The unit growth the Revpar and the effective royalty rate also grow at a faster pace that 9% is again 2023 compared to 2022, when we acquired Radisson in August of 2022.
Speaker Change: That number should be would have been higher in 2023, then it will be in 2024.
Great and then a follow up on your work on the pursuit of Linden.
Scott Oaksmith: And just going now on the Wyndham proposal. I think it was Pat earlier in your prepared remarks that you referenced that you think we have confidence in a deal that could close in a customary timeframe. Can you put a little bit more flesh on the bone on that comment, and is that... thinking different today versus a few months ago after having, you know, additional interactions with, uh, regulatory authorities? Yeah, sure, Joe.
Speaker Change: Got it and just doing.
Speaker Change: A couple of questions.
Speaker Change: The Wyndham proposal I think it was Pat earlier in your prepared remarks, you referenced.
To what extent are pad are you management the board.
Your advisors working on finding potential buyers of newly issued equity in a pro forma company that help fund the deal.
Speaker Change: Do you think we have complements in a deal that could close in the customary timeframe.
Can you put a little bit more.
Speaker Change: Flesh on the bone on that comment in that.
Let's say a greater cash consideration that you have on the table now and also would then lower pro forma debt.
Speaker Change: Thinking different today versus a few months ago after having additional interactions with.
We see that kills two of three concerns.
Speaker Change: Regulatory.
Regulatory but two to three concerns get mitigated from from Linden's perspective.
Speaker Change: Yes, sure Joe in fact.
Patrick Pacious: In fact, you know, we're, I mean, we're three months from from all of that. So yes, we're getting closer to it. You know, when we say the customary timeframe, we we've been saying 12 months,
Speaker Change: I mean, we're three months from from from all of that so yes, we're getting actually closer.
It's also hard not to recognize that you brought in Goldman kind of later in the process at the at some point at the end of last year.
Speaker Change: To it.
Speaker Change: When we say the customary timeframe, we have been saying 12 months.
To what extent is that a priority and to what extent can you share with us conversations on <unk>.
Speaker Change: But as I said now we're six weeks into the second request on the regulatory front.
Selling new equity and whether Stewart would be potentially involved in investing more into our pro forma company.
Speaker Change: That's going to be the long pole in the tent.
Speaker Change: And Thats.
Speaker Change: When we look at it from a second request to to a final outcome. We've been told to expect anything from six to nine months. So as we're six weeks into that six to nine month timeframe.
Yeah.
Yes, Jonathan.
Quite imagine I'm not going to negotiate with you, but we'd be happy to have the conversations you just laid out with the Wyndham Board if they would in fact engage with us and I would say from the from the get go we've been looking at really three things here, which is.
Speaker Change: Getting closer and.
Speaker Change: And that's actually the thing when we talk to Wyndham shareholders.
Speaker Change: I just want to understand not just around the regulatory environment itself, but also the timeframe involved in it.
What is the price that is the right price to pay.
Speaker Change: It's the reason or one of the reasons, we put the exchange offer in place was to get the regulatory process moving which we did in early December. So here. We sit late February we're getting closer to having some clarity for shareholders around that regulatory question and more importantly, the timing of it.
As we said from the beginning we're offering Wyndham premium.
And an earnings multiple the implied earnings multiples that never achieved before so we feel like we are good on that.
The mix between equity and cash.
Is something as we've talked to their shareholders.
Speaker Change: So that's what we've been told to sort of expect from just the precedent and sort of how long these processes take but if you're looking at that six to nine months timeframe from January 12th when the second request began we're moving pretty rapidly down that path.
They like the transaction and they like the equity so providing the equity and the cash mix.
Is something that we feel like we're in a good place today, there's certainly an opportunity.
<unk> to look at that a second time as we get into an engagement with them.
And certainly the leverage that we think both businesses can can handle.
Speaker Change: Great and then a follow up on your work on the proceed of Linden.
Is is pretty high given the high free cash flow generating.
Speaker Change: To what extent are pad are you management the board.
Characteristics that we see here. So there is opportunity to look at this I can tell you we've looked at a lot of different factors to get to the right mix of those three issues, but I think when you look at the offer that we have on the table today. When you look at the feedback we've gotten from the Wyndham shareholders.
Speaker Change: Your advisors working on finding potential buyers of newly issued equity in a pro forma company that help fund the deal.
Speaker Change: Let's say a greater cash consideration that you have on the table now and also would then lower pro forma debt, obviously that kills two of three concerns.
With regard to getting a transaction done.
There is a there is a high level of confidence that we're in that range of of a good good.
Speaker Change: Regulatory but two to three concerns get mitigated from from women's perspective.
Speaker Change: It's also hard not to recognize that you brought in Goldman kind of later in the process of D. At some point at the end of last year.
Good offer that's on the table and as I said that offer can be improved.
If we get two things engagement and due diligence.
Speaker Change: To what extent is that a priority and to what extent can you share with US you know conversations on <unk>.
Thank you very much.
Speaker Change: Selling new equity.
Your next question comes from Meredith Jensen with HSBC. Please go ahead.
And whether it's Stuart would be potentially involved in investing more into our pro forma company.
Yes, Hi, I was wondering if you could speak a little bit more about the retention rate maybe by chain scanner and domestic international just sort of thinking it down a little bit and maybe I'll look over time and what maybe some goals are.
Speaker Change: Yes, Jonathan.
Jonathan: Quite imagine I'm not going to negotiate with you, but we'd be happy to have the conversations you just laid out with the Wyndham Board if they would in fact engage with us.
Jonathan: I'd say from this from the get go we've been looking at really three things here, which is.
And then I was.
Looking back at something from last quarter, you had mentioned.
A strategic partnership in Mexico, and I was wondering if that is chest.
Jonathan: What is the price that is the right price to pay.
Jonathan: As we said from the beginning we're offering Wyndham <unk> premium.
Part of some of the other discussions.
I just wanted to match that up with some of the international growth strategies mentioned today. Thanks.
Jonathan: And an earnings multiple the implied earnings multiples that never achieved before so we feel like we're good on that.
Jonathan: The mix between equity and cash.
Sure Meredith I think when you look at our retention rate I mean, we've historically had a very high retention rate, 97%, 98% is where it sits today.
Jonathan: Is something as we've talked to their shareholders.
Jonathan: They like the transaction and they like the equity so providing the equity and the cash mix.
Obviously, we are.
Jonathan: Is something that we feel like we're in a good place today, there's certainly an opportunity.
Looking to constantly improve our brands and there are times when.
Jonathan: Two to look at that a second time as we get into an engagement with them.
The franchisees are either not willing to invest in our brand or are taking their hotel and making it into an alternative use. So those are those are generally high drivers of where we see franchisee term churn.
Jonathan: And certainly the leverage that we think both businesses can can handle.
Jonathan: Is is pretty high given the high free cash flow generating.
And a lot of that is occurring in the particularly the non hotel use conversion is occurring in that economy.
Jonathan: Characteristics that we see here so.
Jonathan: There's opportunity to look at this I can tell you we've looked at a lot of different factors.
Transient segments, So that's where you see a higher.
Jonathan: To get to the right.
Jonathan: Mix of those three issues, but I think when you look at the offer that we have on the table today. When you look at the feedback we've gotten from the Wyndham shareholders.
Churn rate than you do in the other segments that we operate in.
And in term in terms of international I would say our churn rate is similar to the U S. Most of our brands over overseas are our ring brands. So don't have the high the churn that we have in the economy segment. So if you model out the similar churn rate as our revenue intensive brands that would be a good starting point.
Jonathan: With regard to getting a transaction done.
Jonathan: There is a.
Jonathan: There is a high level of confidence that we're in that range of of a good good.
Jonathan: Good offer that's on the table and as I said that offer can be improved.
Jonathan: If we get two things engagement and due diligence.
As Pat mentioned.
We are guiding to revenue intensive new unit growth of 2%.
Speaker Change: Thank you very much.
And while we will see our economy.
Speaker Change: Your next question comes from Meredith Jensen with HSBC. Please go ahead.
Units declined overall with the overall industry, we do expect to have positive overall net unit growth for the year in 2024.
Meredith Jensen: Yes, Hi, I was wondering if you could speak a little bit more about the retention rate, maybe by chain scale and domestic and international just sort of breaking it down a little bit and maybe I'll look over time and what maybe some goals are.
And I think with regard to your question for the partnership in Mexico.
That's an opportunity that I would I would.
Place it more in the category of a platform opportunity similar to what we do with Blue Green.
Meredith Jensen: And then I was.
Meredith Jensen: Looking back at something from last quarter, you had mentioned.
And what we had with the Ams portfolio several years ago, it's really an opportunity to have their distribution.
Meredith Jensen: A strategic partnership in Mexico, and I was wondering if that is just.
On our platform and have our customers have an earn and burn opportunity through the loyalty program.
Meredith Jensen: Part of some of the other discussions or I just wanted to match that up with some of the international growth strategies mentioned today. Thanks.
Great, Thanks, and just to add on.
The Blue Green point, you had mentioned last quarter that you had anticipated that after the sale of that partnership with continued just as it has and it seems like from your comments on that continues to be the case, which suggests it's Tim.
Speaker Change: Sure Meredith I think when you look at our retention rate I mean, we've historically had a very high retention rate, 97%, 98% is where it sits today.
Speaker Change: Obviously, we are.
Despite the change.
Speaker Change: Looking to constantly improve our brands and there are times when.
That's correct.
Okay, great. Thanks, so much.
Meredith Jensen: The franchisees are either not willing to invest in our brand or are taking their hotel and making it into an alternative use of those are those are generally high drivers of where we see franchisee term churn.
Sure.
Your next question comes from Patrick <unk> with <unk>. Please go ahead.
Meredith Jensen: And a lot of that is occurring in the particularly the non hotel use conversion is occurring in that economy.
Patrick shows your line is open.
Meredith Jensen: Transient segments, So that's where you see a higher.
Meredith Jensen: Churn rate than you do in the other segments that we operate in.
Your next question comes from Brent mature with Barclays. Please go ahead.
Speaker Change: Yeah in term in terms of international I would say our churn rate is similar to the U S. Most of our brands over overseas are our ring brand. So don't have the high the churn that we have in the economy segment. So if you model out the similar churn rate as our revenue intensive brands that would be a good starting point.
Hey.
Thanks, everyone for taking my questions.
The first one is just on Revpar.
Your Q4, Revpar domestically came in a little bit.
Hello.
We had sort of thought was implied by STR chain scale results and then your full year guide of flat.
Speaker Change: As Pat mentioned, we are guiding to revenue intensive new unit growth of 2% and while we will see our economy.
Flat to up to us.
Also a little bit below str's forecast.
Units declined over what with the overall industry. We do expect to have positive overall net unit growth for the year in 2024.
Which for mid scale from a sales closer to 3%. So I guess I am curious if.
One in the fourth quarter, if there was any sort of share loss or anything else you want to call out and then looking for do you have a sort of different outlook on the U S.
Speaker Change: And I think with regard to your question for the partnership in Mexico.
Speaker Change: That's an opportunity that I would I would.
Speaker Change: Place it more in the category of a platform opportunity similar to what we do with blue-green.
Which is conservative or how would you describe your particular outlook for Revpar.
And what we had with the Ams portfolio several years ago.
Speaker Change: It's really an opportunity to have their distribution.
Yeah and in terms of the fourth quarter I think really we had really tougher comps as we said in our scripted remarks that we were the first hotel company to return and exceed the 2019 levels. So when you look at our Q4 results against 2019 were up 13%, which is the leader in the industry. So I think we didn't see anything different in the industry.
Speaker Change: On our platform and have our customers have an earn and burn opportunity through the loyalty program.
Speaker Change: Great Thanks, and just on <unk>.
Speaker Change: The Blue Green point, you had mentioned last quarter that you had anticipated.
After the sale of that partnership with continued just as it has and it seems like from your comments and that continues to be the case with suggested Sam.
I just think our comps were were tougher there.
In terms of the full year I would say, we're probably a little bit conservative on our our guidance compared to STR on 2024.
Speaker Change: Despite the change.
We do see a lot of as I mentioned earlier, the long term fundamentals.
Speaker Change: That's correct.
Speaker Change: Okay, great. Thanks, so much.
Yes.
Speaker Change: Okay.
Speaker Change: Your next question comes from Patrick <unk> with <unk>. Please go ahead.
The growth that we expect to see as I mentioned, we're still 110 basis points down in occupancy against 2019. So it's been a rate driven we do expect business travel to come back and get back to 2019 levels coming here in 2024, and 2025 and we're really excited about our new partnership we just saw.
Speaker Change: Patrick shows your line is open.
AAA and AAA represents 31% of all room nights and we just became one of their preferred partner in the Midscale and economy space. So.
Your next question comes from Brent mature with Barclays. Please go ahead.
We're excited about what the growth can be for the year.
Speaker Change: Hey.
We feel like we'll be in line with industry and I would just say when we look at STR and then we look at some of the other forecasts that.
Brent: Thanks, everyone for taking my questions.
Brent: First one is just on Revpar.
We consider when we make our for our in house forecast they.
Brent: Your Q4, Revpar domestically came in a little bit below what we we had sort of thought was implied by STR chain scale results and then your full year guide of.
They do appear to be and I think many in the industry have sort of <unk>.
Looked at it and so they appear to be a little more.
<unk> then then maybe most in the industry are considering so.
Brent: Flat to up to us.
Brent: Also a little bit below str's forecast.
It's just one of the forecast we do look at when we make our decisions around how we're going to put out our own internal forecast and then ultimately put that into our guidance.
Brent: Which for Midscale upper Midscale is closer to 3%. So I guess I am curious if.
Brent: One in the fourth quarter, if there was any sort of share loss or anything else you want to call out and then looking for do you have a sort of different outlook on the U S.
That makes sense thanks for that.
Just a second follow up on you guys gave us a fair amount of color on churn, but I am curious on the Radisson.
Brent: Which is conservative or how would you describe your particular outlook for Revpar.
Brands those two together those did.
Decline a touch quarter over quarter.
Brent: Yeah.
When does that bottom.
Speaker Change: Yeah and in terms of the fourth quarter I think really we had really tougher comps as we said in our scripted remarks that we were the first hotel company to return and exceed the 2019 levels. So when you look at our Q4 results against 2019 were up 13%, which is the leader in the industry. So I think we didn't see anything different in the industry just think are.
To grow the two brands together and what have you sort of baked into the full year.
The expectations the guidance you gave for net unit growth.
Yes, I think when you look at country Inn and suites, I mean, that's a brand that.
We've said all along let me just start with the fact that when you do these acquisitions you got to get the performance fixed and then you do that and that leads to franchisee interest, which leads the development and growth.
Speaker Change: Comps were were tougher there.
Speaker Change: In terms of the full year I would say, we're probably a little bit conservative on our our guidance compared to STR on 2024.
In the case of country Inn, and suites, and Radisson Greenstein Radisson.
Speaker Change: We do see a lot of I mentioned earlier, the long term fundamentals.
We are we have fixed the performance issues I think on the country and the sweet side, we're already seeing that momentum as we talked about we saw 19 agreements last year 10 of those in December alone. That's the highest that brand had done since 2016. So we feel really confident about the country in our sweets growth coming in 2002.
Speaker Change: Yeah.
Yes.
Speaker Change: The growth that we expect to see as I mentioned, we're still 110 basis points down in occupancy against 2019. So it's been a rate driven we do expect business travel to come back and get back to 2019 levels coming here in 2024, and 2025 and we're really excited about our new partnership we just saw.
For now a lot of that is new construction. So it's still up against a higher interest headwind, but we feel really good about the developer interest the Radisson Greenstein full service Radisson is likely going to continue to see some decline in 2024 with a reversal of that in growth coming in 2025, and Thats a function primary.
Speaker Change: With AAA and AAA represents 31% of all room nights and we just became one of their preferred partner in the Midscale and economy space. So we're excited about what the growth could be for the year.
Speaker Change: We feel like we'll be in line with industry.
Speaker Change: Yeah, and I would just say when we look at STR and then we look at some of the other forecast that.
Italy of just those are generally more urban hotels larger boxes and the timeframe that.
Speaker Change: We consider when we make our for our in house forecast they.
Speaker Change: They do appear to be and I think many in the industry have sort of.
They are they take when they when they change flags as much more elongated so.
Speaker Change: <unk> looked at it and so they appear to be a little more aggressive than maybe most in the industry are considering so.
It's really a function of timing rather than anything else I think on win country coming back. This year 2024, and then Radisson greenstein returning to growth in 2025.
Speaker Change: It's just one of the forecast we do look at when we make our decisions around how we're going to put out our own internal forecast and then ultimately put that into our guidance.
That's super helpful. Thanks, everyone.
Speaker Change: That makes sense thanks for that.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the <unk> line.
Speaker Change: Then just a second follow up on you guys gave us a fair amount of color on churn, but I am curious on the Radisson.
There are no further questions at this time. Please proceed.
Speaker Change: Brands those two together those did.
Speaker Change: Decline a touch quarter over quarter.
Thank you operator, thanks again, everyone for your time. This morning, we will talk to you again in May when we announce our first quarter results have a great day.
When does that bottom.
Speaker Change: To grow the two brands together and what have you sort of baked into the full year.
Speaker Change: Expectations. The guidance you gave for net unit growth.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in that say you. Please disconnect your lines.
Yes, I think when you look at country Inn and suites.
Speaker Change: A brand that in it.
Speaker Change: We've said all along let me just start with the fact that when you do these acquisitions you got to get the performance fixed and then you do that and that leads to franchisee interest, which leads to development and growth.
Speaker Change: In the case of country and in suites, and Radisson Greenstein Radisson.
Speaker Change: We are we have fixed the performance issues I think on the country and sweet side, we're already seeing that momentum as we talked about we saw 19 agreements last year 10 of those in December alone. That's the highest that brand had done since 2016, so we feel really confident about the country and our suites growth coming in 2020.
Speaker Change: For now a lot of that is new construction. So it's still up against a higher interest headwind, we feel really good about the developer interest the Radisson Greenstein full service Radisson is likely going to continue to see some decline in 2024 with a reversal of that in growth coming in 2025, and that's a function primarily.
Speaker Change: <unk> just those are generally more urban hotels larger boxes and the timeframe that.
Speaker Change: They are they take when they when they change flags as much more elongated so.
Speaker Change: It's really a function of timing rather than anything else I think on win country coming back. This year 2024, and then Radisson greenstein returning to growth in 2025.
Speaker Change: That's super helpful. Thanks, everyone.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the one.
Speaker Change: There are no further questions at this time. Please proceed.
Speaker Change: Thank you operator, thanks again, everyone for your time. This morning, we will talk to you again in May when we announce our first quarter results have a great day.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines Goodbye.
Speaker Change: [music].